Correlation Between ALPHABET and Consol Energy

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

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

Diversification Opportunities for ALPHABET and Consol Energy

-0.16

Correlation Coefficient

ALPHABET  Consol Energy

Good diversification

The 3 months correlation between ALPHABET and Consol is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding ALPHABET INC and Consol Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Consol Energy and ALPHABET 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 ALPHABET INC 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 ALPHABET i.e., ALPHABET and Consol Energy go up and down completely randomly.

Pair Corralation between ALPHABET and Consol Energy

Assuming the 90 days trading horizon ALPHABET INC is expected to under-perform the Consol Energy. But the bond apears to be less risky and, when comparing its historical volatility, ALPHABET INC is 2.81 times less risky than Consol Energy. The bond trades about -0.1 of its potential returns per unit of risk. The Consol Energy is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  9,684  in Consol Energy on September 14, 2024 and sell it today you would earn a total of  2,118  from holding Consol Energy or generate 21.87% return on investment over 90 days.

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

ALPHABET INC  vs.  Consol Energy

ALPHABET INC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ALPHABET INC has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, ALPHABET is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Consol Energy

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Consol Energy are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak forward indicators, Consol Energy showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with ALPHABET and Consol Energy

The main advantage of trading using opposite ALPHABET and Consol Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ALPHABET 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 ALPHABET INC 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.