Correlation Between HF Sinclair and Peabody Energy

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

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

Diversification Opportunities for HF Sinclair and Peabody Energy

-0.49

Correlation Coefficient

HF Sinclair  Peabody Energy

Very good diversification

The 3 months correlation between DINO and Peabody is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding HF Sinclair Corp and Peabody Energy Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Peabody Energy Corp and HF Sinclair 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 HF Sinclair Corp are associated (or correlated) with Peabody Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Peabody Energy Corp has no effect on the direction of HF Sinclair i.e., HF Sinclair and Peabody Energy go up and down completely randomly.

Pair Corralation between HF Sinclair and Peabody Energy

Given the investment horizon of 90 days HF Sinclair Corp is expected to under-perform the Peabody Energy. But the stock apears to be less risky and, when comparing its historical volatility, HF Sinclair Corp is 1.33 times less risky than Peabody Energy. The stock trades about -0.09 of its potential returns per unit of risk. The Peabody Energy Corp is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  2,207  in Peabody Energy Corp on September 1, 2024 and sell it today you would earn a total of  178.00  from holding Peabody Energy Corp or generate 8.07% return on investment over 90 days.

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

HF Sinclair Corp  vs.  Peabody Energy Corp

HF Sinclair Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days HF Sinclair Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest conflicting performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Peabody Energy Corp

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Peabody Energy Corp are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Peabody Energy may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with HF Sinclair and Peabody Energy

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

The idea behind HF Sinclair Corp and Peabody Energy Corp 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.

Check out your portfolio center.

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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.