Correlation Between Consol Energy and Mills Music

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

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

Diversification Opportunities for Consol Energy and Mills Music

0.7

Correlation Coefficient

Consol Energy  Mills Music

Poor diversification

The 3 months correlation between Consol and Mills is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Consol Energy and Mills Music Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mills Music Trust 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 Mills Music. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mills Music Trust has no effect on the direction of Consol Energy i.e., Consol Energy and Mills Music go up and down completely randomly.

Pair Corralation between Consol Energy and Mills Music

Given the investment horizon of 90 days Consol Energy is expected to generate 0.76 times more return on investment than Mills Music. However, Consol Energy is 1.31 times less risky than Mills Music. It trades about 0.07 of its potential returns per unit of risk. Mills Music Trust is currently generating about 0.03 per unit of risk. If you would invest  8,239  in Consol Energy on September 27, 2024 and sell it today you would earn a total of  2,110  from holding Consol Energy or generate 25.61% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	86.31%
Values	Daily Returns

Consol Energy  vs.  Mills Music Trust

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. In spite of fairly strong forward indicators, Consol Energy is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Mills Music Trust

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Mills Music Trust are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Mills Music is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Consol Energy and Mills Music

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

The idea behind Consol Energy and Mills Music Trust 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.