Correlation Between Peabody Energy and New HopeLimited
Can any of the company-specific risk be diversified away by investing in both Peabody Energy and New HopeLimited 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 Peabody Energy and New HopeLimited into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Peabody Energy and New Hope, you can compare the effects of market volatilities on Peabody Energy and New HopeLimited 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 Peabody Energy with a short position of New HopeLimited. Check out your portfolio center. Please also check ongoing floating volatility patterns of Peabody Energy and New HopeLimited.
Diversification Opportunities for Peabody Energy and New HopeLimited
0.69 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Peabody and New is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Peabody Energy and New Hope in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on New HopeLimited and Peabody 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 Peabody Energy are associated (or correlated) with New HopeLimited. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of New HopeLimited has no effect on the direction of Peabody Energy i.e., Peabody Energy and New HopeLimited go up and down completely randomly.
Pair Corralation between Peabody Energy and New HopeLimited
Assuming the 90 days horizon Peabody Energy is expected to under-perform the New HopeLimited. But the stock apears to be less risky and, when comparing its historical volatility, Peabody Energy is 1.07 times less risky than New HopeLimited. The stock trades about -0.04 of its potential returns per unit of risk. The New Hope is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest 287.00 in New Hope on December 1, 2024 and sell it today you would lose (46.00) from holding New Hope or give up 16.03% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 99.8% |
| Values | Daily Returns |
Peabody Energy vs. New Hope
Performance |
| Timeline |
| Peabody Energy |
| New HopeLimited |
Peabody Energy and New HopeLimited Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Peabody Energy and New HopeLimited
The main advantage of trading using opposite Peabody Energy and New HopeLimited positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Peabody Energy position performs unexpectedly, New HopeLimited 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 New HopeLimited will offset losses from the drop in New HopeLimited's long position.| Peabody Energy vs. Computer And Technologies | Peabody Energy vs. Hastings Technology Metals | Peabody Energy vs. Casio Computer CoLtd | Peabody Energy vs. METHODE ELECTRONICS |
| New HopeLimited vs. Infrastrutture Wireless Italiane | New HopeLimited vs. Datang International Power | New HopeLimited vs. Datalogic SpA | New HopeLimited vs. Geely Automobile Holdings |
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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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