Correlation Between Vulcan Materials and CONSOL Energy
Can any of the company-specific risk be diversified away by investing in both Vulcan Materials 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 Vulcan Materials and CONSOL Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Vulcan Materials and CONSOL Energy, you can compare the effects of market volatilities on Vulcan Materials 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 Vulcan Materials with a short position of CONSOL Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vulcan Materials and CONSOL Energy.
Diversification Opportunities for Vulcan Materials and CONSOL Energy
0.95 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Vulcan and CONSOL is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding Vulcan Materials and CONSOL Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CONSOL Energy and Vulcan Materials 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 Vulcan Materials 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 Vulcan Materials i.e., Vulcan Materials and CONSOL Energy go up and down completely randomly.
Pair Corralation between Vulcan Materials and CONSOL Energy
Assuming the 90 days horizon Vulcan Materials is expected to generate 2.38 times less return on investment than CONSOL Energy. But when comparing it to its historical volatility, Vulcan Materials is 1.28 times less risky than CONSOL Energy. It trades about 0.17 of its potential returns per unit of risk. CONSOL Energy is currently generating about 0.32 of returns per unit of risk over similar time horizon. If you would invest 10,138 in CONSOL Energy on September 2, 2024 and sell it today you would earn a total of 2,377 from holding CONSOL Energy or generate 23.45% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Vulcan Materials vs. CONSOL Energy
Performance |
| Timeline |
| Vulcan Materials |
| CONSOL Energy |
Vulcan Materials and CONSOL Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vulcan Materials and CONSOL Energy
The main advantage of trading using opposite Vulcan Materials and CONSOL Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vulcan Materials 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.| Vulcan Materials vs. CECO ENVIRONMENTAL | Vulcan Materials vs. BLUESCOPE STEEL | Vulcan Materials vs. RELIANCE STEEL AL | Vulcan Materials vs. APPLIED MATERIALS |
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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
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