Correlation Between Consol Energy and Western Digital
Can any of the company-specific risk be diversified away by investing in both Consol Energy and Western Digital at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Consol Energy and Western Digital into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Consol Energy and Western Digital, you can compare the effects of market volatilities on Consol Energy and Western Digital and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Consol Energy with a short position of Western Digital. Check out your portfolio center. Please also check ongoing floating volatility patterns of Consol Energy and Western Digital.
Diversification Opportunities for Consol Energy and Western Digital
0.29 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Consol and Western is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Consol Energy and Western Digital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Western Digital and Consol Energy is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Consol Energy are associated (or correlated) with Western Digital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Western Digital has no effect on the direction of Consol Energy i.e., Consol Energy and Western Digital go up and down completely randomly.
Pair Corralation between Consol Energy and Western Digital
Given the investment horizon of 90 days Consol Energy is expected to generate 1.02 times more return on investment than Western Digital. However, Consol Energy is 1.02 times more volatile than Western Digital. It trades about 0.04 of its potential returns per unit of risk. Western Digital is currently generating about 0.03 per unit of risk. If you would invest 8,632 in Consol Energy on November 2, 2024 and sell it today you would earn a total of 1,329 from holding Consol Energy or generate 15.4% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Very Weak |
Accuracy | 95.56% |
Values | Daily Returns |
Consol Energy vs. Western Digital
Performance |
Timeline |
Consol Energy |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Western Digital |
Consol Energy and Western Digital Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Consol Energy and Western Digital
The main advantage of trading using opposite Consol Energy and Western Digital positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Consol Energy position performs unexpectedly, Western Digital can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Western Digital will offset losses from the drop in Western Digital's long position.Consol Energy vs. Alliance Resource Partners | Consol Energy vs. Natural Resource Partners | Consol Energy vs. Hallador Energy | Consol Energy vs. NACCO Industries |
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Check out your portfolio center.Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.
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