Correlation Between Mills Music and Consol Energy

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

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

Diversification Opportunities for Mills Music and Consol Energy

0.7

Correlation Coefficient

Mills Music  Consol Energy

Poor diversification

The 3 months correlation between Mills and Consol is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Mills Music Trust and Consol Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Consol Energy and Mills Music 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 Mills Music Trust 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 Mills Music i.e., Mills Music and Consol Energy go up and down completely randomly.

Pair Corralation between Mills Music and Consol Energy

Assuming the 90 days horizon Mills Music is expected to generate 1.51 times less return on investment than Consol Energy. In addition to that, Mills Music is 1.31 times more volatile than Consol Energy. It trades about 0.03 of its total potential returns per unit of risk. Consol Energy is currently generating about 0.07 per unit of volatility. If you would invest  8,239  in Consol Energy on September 27, 2024 and sell it today you would earn a total of  2,110  from holding Consol Energy or generate 25.61% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	86.31%
Values	Daily Returns

Mills Music Trust  vs.  Consol Energy

Mills Music Trust

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Mills Music Trust are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Mills Music 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

0 of 100

Very Weak

Over the last 90 days Consol Energy has generated negative risk-adjusted returns adding no value to investors with long positions. 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 Mills Music and Consol Energy

The main advantage of trading using opposite Mills Music and Consol Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Mills Music 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 Mills Music Trust 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.

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 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.