Correlation Between Consol Energy and ScanSource

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

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

Diversification Opportunities for Consol Energy and ScanSource

0.62

Correlation Coefficient

Consol Energy  ScanSource

Poor diversification

The 3 months correlation between Consol and ScanSource is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Consol Energy and ScanSource in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ScanSource 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 ScanSource. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ScanSource has no effect on the direction of Consol Energy i.e., Consol Energy and ScanSource go up and down completely randomly.

Pair Corralation between Consol Energy and ScanSource

Given the investment horizon of 90 days Consol Energy is expected to generate 1.3 times more return on investment than ScanSource. However, Consol Energy is 1.3 times more volatile than ScanSource. It trades about 0.06 of its potential returns per unit of risk. ScanSource is currently generating about 0.05 per unit of risk. If you would invest  6,006  in Consol Energy on October 11, 2024 and sell it today you would earn a total of  4,545  from holding Consol Energy or generate 75.67% return on investment over 90 days.

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

Consol Energy  vs.  ScanSource

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.

ScanSource

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ScanSource has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, ScanSource is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Consol Energy and ScanSource

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

The idea behind Consol Energy and ScanSource 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.