Correlation Between Consol Energy and Nabors Industries

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

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

Diversification Opportunities for Consol Energy and Nabors Industries

0.32

Correlation Coefficient

Consol Energy  Nabors Industries

Weak diversification

The 3 months correlation between Consol and Nabors is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding Consol Energy and Nabors Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nabors Industries 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 Nabors Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nabors Industries has no effect on the direction of Consol Energy i.e., Consol Energy and Nabors Industries go up and down completely randomly.

Pair Corralation between Consol Energy and Nabors Industries

Given the investment horizon of 90 days Consol Energy is expected to generate 0.79 times more return on investment than Nabors Industries. However, Consol Energy is 1.27 times less risky than Nabors Industries. It trades about 0.06 of its potential returns per unit of risk. Nabors Industries is currently generating about -0.04 per unit of risk. If you would invest  5,588  in Consol Energy on September 21, 2024 and sell it today you would earn a total of  5,241  from holding Consol Energy or generate 93.79% 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.  Nabors Industries

Consol Energy

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Consol Energy are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak forward indicators, Consol Energy showed solid returns over the last few months and may actually be approaching a breakup point.

Nabors Industries

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Nabors Industries has generated negative risk-adjusted returns adding no value to investors with long positions. Even with weak performance in the last few months, the Stock's fundamental drivers remain relatively invariable which may send shares a bit higher in January 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Pair Trading with Consol Energy and Nabors Industries

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

The idea behind Consol Energy and Nabors Industries 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.