Correlation Between Altria and Consol Energy
Can any of the company-specific risk be diversified away by investing in both Altria 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 Altria and Consol Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Altria Group and Consol Energy, you can compare the effects of market volatilities on Altria 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 Altria with a short position of Consol Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Altria and Consol Energy.
Diversification Opportunities for Altria and Consol Energy
0.64 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Altria and Consol is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Altria Group and Consol Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Consol Energy and Altria 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 Altria 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 Altria i.e., Altria and Consol Energy go up and down completely randomly.
Pair Corralation between Altria and Consol Energy
Allowing for the 90-day total investment horizon Altria is expected to generate 1.27 times less return on investment than Consol Energy. But when comparing it to its historical volatility, Altria Group is 1.74 times less risky than Consol Energy. It trades about 0.37 of its potential returns per unit of risk. Consol Energy is currently generating about 0.27 of returns per unit of risk over similar time horizon. If you would invest 11,016 in Consol Energy on August 30, 2024 and sell it today you would earn a total of 2,123 from holding Consol Energy or generate 19.27% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Altria Group vs. Consol Energy
Performance |
| Timeline |
| Altria Group |
| Consol Energy |
Altria and Consol Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Altria and Consol Energy
The main advantage of trading using opposite Altria and Consol Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Altria 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.| Altria vs. British American Tobacco | Altria vs. Universal | Altria vs. Imperial Brands PLC | Altria vs. Philip Morris International |
| 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
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