Correlation Between Consol Energy and Whitehaven Coal
Can any of the company-specific risk be diversified away by investing in both Consol Energy and Whitehaven Coal 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 Whitehaven Coal into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Consol Energy and Whitehaven Coal Limited, you can compare the effects of market volatilities on Consol Energy and Whitehaven Coal 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 Whitehaven Coal. Check out your portfolio center. Please also check ongoing floating volatility patterns of Consol Energy and Whitehaven Coal.
Diversification Opportunities for Consol Energy and Whitehaven Coal
0.27 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Consol and Whitehaven is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding Consol Energy and Whitehaven Coal Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Whitehaven Coal 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 Whitehaven Coal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Whitehaven Coal has no effect on the direction of Consol Energy i.e., Consol Energy and Whitehaven Coal go up and down completely randomly.
Pair Corralation between Consol Energy and Whitehaven Coal
Given the investment horizon of 90 days Consol Energy is expected to generate 1.02 times more return on investment than Whitehaven Coal. However, Consol Energy is 1.02 times more volatile than Whitehaven Coal Limited. It trades about 0.08 of its potential returns per unit of risk. Whitehaven Coal Limited is currently generating about -0.05 per unit of risk. If you would invest 10,523 in Consol Energy on September 1, 2024 and sell it today you would earn a total of 2,547 from holding Consol Energy or generate 24.2% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Consol Energy vs. Whitehaven Coal Limited
Performance |
| Timeline |
| Consol Energy |
| Whitehaven Coal |
Consol Energy and Whitehaven Coal Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Consol Energy and Whitehaven Coal
The main advantage of trading using opposite Consol Energy and Whitehaven Coal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Consol Energy position performs unexpectedly, Whitehaven Coal 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 Whitehaven Coal will offset losses from the drop in Whitehaven Coal'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 |
| Whitehaven Coal vs. New Hope | Whitehaven Coal vs. Adaro Energy Tbk | Whitehaven Coal vs. Thungela Resources Limited | Whitehaven Coal vs. Yancoal Australia |
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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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