Correlation Between Ford and CONSOL Energy

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

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

Diversification Opportunities for Ford and CONSOL Energy

0.41

Correlation Coefficient

Ford  CONSOL Energy

Very weak diversification

The 3 months correlation between Ford and CONSOL is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and CONSOL Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CONSOL Energy and Ford 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 Ford Motor 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 Ford i.e., Ford and CONSOL Energy go up and down completely randomly.

Pair Corralation between Ford and CONSOL Energy

Taking into account the 90-day investment horizon Ford Motor is expected to generate 0.86 times more return on investment than CONSOL Energy. However, Ford Motor is 1.16 times less risky than CONSOL Energy. It trades about -0.5 of its potential returns per unit of risk. CONSOL Energy is currently generating about -0.57 per unit of risk. If you would invest  1,140  in Ford Motor on September 24, 2024 and sell it today you would lose (152.00) from holding Ford Motor or give up 13.33% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	95.24%
Values	Daily Returns

Ford Motor  vs.  CONSOL Energy

Ford Motor

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ford Motor has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unfluctuating performance, the Stock's technical and fundamental indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

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 Ford and CONSOL Energy

The main advantage of trading using opposite Ford and CONSOL Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford 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 Ford Motor 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.