Correlation Between Consol Energy and AETNA

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

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

Diversification Opportunities for Consol Energy and AETNA

-0.75

Correlation Coefficient

Consol Energy  AETNA

Pay attention - limited upside

The 3 months correlation between Consol and AETNA is -0.75. Overlapping area represents the amount of risk that can be diversified away by holding Consol Energy and AETNA INC NEW in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AETNA INC NEW 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 AETNA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AETNA INC NEW has no effect on the direction of Consol Energy i.e., Consol Energy and AETNA go up and down completely randomly.

Pair Corralation between Consol Energy and AETNA

Given the investment horizon of 90 days Consol Energy is expected to generate 1.73 times more return on investment than AETNA. However, Consol Energy is 1.73 times more volatile than AETNA INC NEW. It trades about 0.22 of its potential returns per unit of risk. AETNA INC NEW is currently generating about -0.06 per unit of risk. If you would invest  9,552  in Consol Energy on September 2, 2024 and sell it today you would earn a total of  3,518  from holding Consol Energy or generate 36.83% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	90.63%
Values	Daily Returns

Consol Energy  vs.  AETNA INC NEW

Consol Energy

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Consol Energy are ranked lower than 17 (%) 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.

AETNA INC NEW

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days AETNA INC NEW has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, AETNA is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Consol Energy and AETNA

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

The idea behind Consol Energy and AETNA INC NEW 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.