Correlation Between SIERRA METALS and CONSOL Energy

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

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

Diversification Opportunities for SIERRA METALS and CONSOL Energy

-0.78

Correlation Coefficient

SIERRA METALS  CONSOL Energy

Pay attention - limited upside

The 3 months correlation between SIERRA and CONSOL is -0.78. Overlapping area represents the amount of risk that can be diversified away by holding SIERRA METALS and CONSOL Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CONSOL Energy and SIERRA METALS 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 SIERRA METALS 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 SIERRA METALS i.e., SIERRA METALS and CONSOL Energy go up and down completely randomly.

Pair Corralation between SIERRA METALS and CONSOL Energy

Assuming the 90 days trading horizon SIERRA METALS is expected to generate 1.4 times more return on investment than CONSOL Energy. However, SIERRA METALS is 1.4 times more volatile than CONSOL Energy. It trades about 0.06 of its potential returns per unit of risk. CONSOL Energy is currently generating about 0.07 per unit of risk. If you would invest  28.00  in SIERRA METALS on October 12, 2024 and sell it today you would earn a total of  26.00  from holding SIERRA METALS or generate 92.86% return on investment over 90 days.

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

SIERRA METALS  vs.  CONSOL Energy

SIERRA METALS

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SIERRA METALS has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, SIERRA METALS is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

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. Despite nearly stable basic indicators, CONSOL Energy is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with SIERRA METALS and CONSOL Energy

The main advantage of trading using opposite SIERRA METALS and CONSOL Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SIERRA METALS 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 SIERRA METALS 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.