Correlation Between Carbon Revolution and Consol Energy

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

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

Diversification Opportunities for Carbon Revolution and Consol Energy

-0.39

Correlation Coefficient

Carbon Revolution  Consol Energy

Very good diversification

The 3 months correlation between Carbon and Consol is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding Carbon Revolution Public and Consol Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Consol Energy and Carbon Revolution 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 Carbon Revolution Public 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 Carbon Revolution i.e., Carbon Revolution and Consol Energy go up and down completely randomly.

Pair Corralation between Carbon Revolution and Consol Energy

Assuming the 90 days horizon Carbon Revolution Public is expected to generate 10.08 times more return on investment than Consol Energy. However, Carbon Revolution is 10.08 times more volatile than Consol Energy. It trades about 0.1 of its potential returns per unit of risk. Consol Energy is currently generating about 0.06 per unit of risk. If you would invest  4.89  in Carbon Revolution Public on October 4, 2024 and sell it today you would earn a total of  1.36  from holding Carbon Revolution Public or generate 27.81% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	47.98%
Values	Daily Returns

Carbon Revolution Public  vs.  Consol Energy

Carbon Revolution Public

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Carbon Revolution Public are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile basic indicators, Carbon Revolution showed solid returns over the last few months and may actually be approaching a breakup point.

Consol Energy

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Consol Energy are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. 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.

Pair Trading with Carbon Revolution and Consol Energy

The main advantage of trading using opposite Carbon Revolution and Consol Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Carbon Revolution 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 Carbon Revolution Public 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.