Correlation Between EMCOR and Consol Energy
Can any of the company-specific risk be diversified away by investing in both EMCOR and Consol Energy 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 EMCOR and Consol Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between EMCOR Group and Consol Energy, you can compare the effects of market volatilities on EMCOR and Consol Energy 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 EMCOR with a short position of Consol Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of EMCOR and Consol Energy.
Diversification Opportunities for EMCOR and Consol Energy
0.94 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between EMCOR and Consol is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding EMCOR Group and Consol Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Consol Energy and EMCOR 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 EMCOR Group are associated (or correlated) with Consol Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Consol Energy has no effect on the direction of EMCOR i.e., EMCOR and Consol Energy go up and down completely randomly.
Pair Corralation between EMCOR and Consol Energy
Considering the 90-day investment horizon EMCOR Group is expected to generate 0.66 times more return on investment than Consol Energy. However, EMCOR Group is 1.51 times less risky than Consol Energy. It trades about 0.14 of its potential returns per unit of risk. Consol Energy is currently generating about 0.06 per unit of risk. If you would invest 14,811 in EMCOR Group on August 26, 2024 and sell it today you would earn a total of 35,681 from holding EMCOR Group or generate 240.91% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
EMCOR Group vs. Consol Energy
Performance |
| Timeline |
| EMCOR Group |
| Consol Energy |
EMCOR and Consol Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with EMCOR and Consol Energy
The main advantage of trading using opposite EMCOR and Consol Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if EMCOR position performs unexpectedly, Consol Energy 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 Consol Energy will offset losses from the drop in Consol Energy's long position.The idea behind EMCOR Group and Consol Energy pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| Consol Energy vs. Alliance Resource Partners | Consol Energy vs. Natural Resource Partners | Consol Energy vs. Hallador Energy | Consol Energy vs. NACCO Industries |
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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
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