Correlation Between BII Railway and CONSOL Energy

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

By analyzing existing cross correlation between BII Railway Transportation and CONSOL Energy, you can compare the effects of market volatilities on BII Railway and CONSOL Energy 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 BII Railway with a short position of CONSOL Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of BII Railway and CONSOL Energy.

Diversification Opportunities for BII Railway and CONSOL Energy

-0.42

Correlation Coefficient

BII Railway  CONSOL Energy

Very good diversification

The 3 months correlation between BII and CONSOL is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding BII Railway Transportation and CONSOL Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CONSOL Energy and BII Railway 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 BII Railway Transportation are associated (or correlated) with CONSOL Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CONSOL Energy has no effect on the direction of BII Railway i.e., BII Railway and CONSOL Energy go up and down completely randomly.

Pair Corralation between BII Railway and CONSOL Energy

Assuming the 90 days horizon BII Railway Transportation is expected to generate 0.95 times more return on investment than CONSOL Energy. However, BII Railway Transportation is 1.05 times less risky than CONSOL Energy. It trades about 0.23 of its potential returns per unit of risk. CONSOL Energy is currently generating about -0.57 per unit of risk. If you would invest  2.60  in BII Railway Transportation on September 24, 2024 and sell it today you would earn a total of  0.20  from holding BII Railway Transportation or generate 7.69% return on investment over 90 days.

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

BII Railway Transportation  vs.  CONSOL Energy

BII Railway Transpor

Risk-Adjusted Performance

4 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in BII Railway Transportation are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, BII Railway reported solid returns over the last few months and may actually be approaching a breakup point.

CONSOL Energy

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in CONSOL Energy are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, CONSOL Energy reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with BII Railway and CONSOL Energy

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

The idea behind BII Railway Transportation and CONSOL Energy 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.