Correlation Between Consol Energy and Western Copper

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

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

Diversification Opportunities for Consol Energy and Western Copper

-0.37

Correlation Coefficient

Consol Energy  Western Copper

Very good diversification

The 3 months correlation between Consol and Western is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding Consol Energy and Western Copper and in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Western Copper 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 Western Copper. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Western Copper has no effect on the direction of Consol Energy i.e., Consol Energy and Western Copper go up and down completely randomly.

Pair Corralation between Consol Energy and Western Copper

Given the investment horizon of 90 days Consol Energy is expected to under-perform the Western Copper. But the stock apears to be less risky and, when comparing its historical volatility, Consol Energy is 1.22 times less risky than Western Copper. The stock trades about -0.61 of its potential returns per unit of risk. The Western Copper and is currently generating about -0.18 of returns per unit of risk over similar time horizon. If you would invest  114.00  in Western Copper and on September 23, 2024 and sell it today you would lose (10.00) from holding Western Copper and or give up 8.77% of portfolio value over 90 days.

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

Consol Energy  vs.  Western Copper and

Consol Energy

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Consol Energy are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak forward indicators, Consol Energy may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Western Copper

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Western Copper and has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in January 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Consol Energy and Western Copper

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

The idea behind Consol Energy and Western Copper and 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.