Correlation Between Natural Resource and Hallador Energy
Can any of the company-specific risk be diversified away by investing in both Natural Resource and Hallador 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 Natural Resource and Hallador Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Natural Resource Partners and Hallador Energy, you can compare the effects of market volatilities on Natural Resource and Hallador 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 Natural Resource with a short position of Hallador Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Natural Resource and Hallador Energy.
Diversification Opportunities for Natural Resource and Hallador Energy
0.78 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Natural and Hallador is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Natural Resource Partners and Hallador Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hallador Energy and Natural Resource 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 Natural Resource Partners are associated (or correlated) with Hallador Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hallador Energy has no effect on the direction of Natural Resource i.e., Natural Resource and Hallador Energy go up and down completely randomly.
Pair Corralation between Natural Resource and Hallador Energy
Considering the 90-day investment horizon Natural Resource Partners is expected to generate 0.5 times more return on investment than Hallador Energy. However, Natural Resource Partners is 2.0 times less risky than Hallador Energy. It trades about 0.11 of its potential returns per unit of risk. Hallador Energy is currently generating about 0.04 per unit of risk. If you would invest 3,702 in Natural Resource Partners on August 24, 2024 and sell it today you would earn a total of 6,973 from holding Natural Resource Partners or generate 188.36% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Natural Resource Partners vs. Hallador Energy
Performance |
| Timeline |
| Natural Resource Partners |
| Hallador Energy |
Natural Resource and Hallador Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Natural Resource and Hallador Energy
The main advantage of trading using opposite Natural Resource and Hallador Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Natural Resource position performs unexpectedly, Hallador 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 Hallador Energy will offset losses from the drop in Hallador Energy's long position.| Natural Resource vs. Hallador Energy | Natural Resource vs. Consol Energy | Natural Resource vs. Adaro Energy Tbk | Natural Resource vs. Alliance Resource Partners |
| Hallador Energy vs. Natural Resource Partners | Hallador Energy vs. Consol Energy | Hallador Energy vs. Adaro Energy Tbk | Hallador Energy vs. Alliance Resource Partners |
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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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