Correlation Between CONSOL Energy and APPLIED MATERIALS

Can any of the company-specific risk be diversified away by investing in both CONSOL Energy and APPLIED MATERIALS 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 CONSOL Energy and APPLIED MATERIALS into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between CONSOL Energy and APPLIED MATERIALS, you can compare the effects of market volatilities on CONSOL Energy and APPLIED MATERIALS 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 CONSOL Energy with a short position of APPLIED MATERIALS. Check out your portfolio center. Please also check ongoing floating volatility patterns of CONSOL Energy and APPLIED MATERIALS.

Diversification Opportunities for CONSOL Energy and APPLIED MATERIALS

-0.26

Correlation Coefficient

CONSOL Energy  APPLIED MATERIALS

Very good diversification

The 3 months correlation between CONSOL and APPLIED is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding CONSOL Energy and APPLIED MATERIALS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on APPLIED MATERIALS and CONSOL 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 CONSOL Energy are associated (or correlated) with APPLIED MATERIALS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of APPLIED MATERIALS has no effect on the direction of CONSOL Energy i.e., CONSOL Energy and APPLIED MATERIALS go up and down completely randomly.

Pair Corralation between CONSOL Energy and APPLIED MATERIALS

Assuming the 90 days horizon CONSOL Energy is expected to under-perform the APPLIED MATERIALS. In addition to that, CONSOL Energy is 1.21 times more volatile than APPLIED MATERIALS. It trades about -0.11 of its total potential returns per unit of risk. APPLIED MATERIALS is currently generating about 0.41 per unit of volatility. If you would invest  15,826  in APPLIED MATERIALS on October 23, 2024 and sell it today you would earn a total of  2,800  from holding APPLIED MATERIALS or generate 17.69% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

CONSOL Energy  vs.  APPLIED MATERIALS

CONSOL Energy

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CONSOL Energy has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, CONSOL Energy is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

APPLIED MATERIALS

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in APPLIED MATERIALS are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, APPLIED MATERIALS unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with CONSOL Energy and APPLIED MATERIALS

The main advantage of trading using opposite CONSOL Energy and APPLIED MATERIALS positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CONSOL Energy position performs unexpectedly, APPLIED MATERIALS 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 APPLIED MATERIALS will offset losses from the drop in APPLIED MATERIALS's long position.

The idea behind CONSOL Energy and APPLIED MATERIALS 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.

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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 Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.