Correlation Between CONSOL Energy and Yancoal Australia

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

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

Diversification Opportunities for CONSOL Energy and Yancoal Australia

0.33

Correlation Coefficient

CONSOL Energy  Yancoal Australia

Weak diversification

The 3 months correlation between CONSOL and Yancoal is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding CONSOL Energy and Yancoal Australia in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Yancoal Australia 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 Yancoal Australia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Yancoal Australia has no effect on the direction of CONSOL Energy i.e., CONSOL Energy and Yancoal Australia go up and down completely randomly.

Pair Corralation between CONSOL Energy and Yancoal Australia

Assuming the 90 days horizon CONSOL Energy is expected to generate 0.75 times more return on investment than Yancoal Australia. However, CONSOL Energy is 1.34 times less risky than Yancoal Australia. It trades about 0.06 of its potential returns per unit of risk. Yancoal Australia is currently generating about 0.04 per unit of risk. If you would invest  5,809  in CONSOL Energy on September 23, 2024 and sell it today you would earn a total of  4,541  from holding CONSOL Energy or generate 78.17% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

CONSOL Energy  vs.  Yancoal Australia

CONSOL Energy

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in CONSOL Energy are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, CONSOL Energy reported solid returns over the last few months and may actually be approaching a breakup point.

Yancoal Australia

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Yancoal Australia are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, Yancoal Australia may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with CONSOL Energy and Yancoal Australia

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

The idea behind CONSOL Energy and Yancoal Australia 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.

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.