Correlation Between Zimmer Biomet and CONSOL Energy

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

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

Diversification Opportunities for Zimmer Biomet and CONSOL Energy

0.89

Correlation Coefficient

Zimmer Biomet  CONSOL Energy

Very poor diversification

The 3 months correlation between Zimmer and CONSOL is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Zimmer Biomet Holdings and CONSOL Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CONSOL Energy and Zimmer Biomet 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 Zimmer Biomet Holdings 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 Zimmer Biomet i.e., Zimmer Biomet and CONSOL Energy go up and down completely randomly.

Pair Corralation between Zimmer Biomet and CONSOL Energy

Assuming the 90 days horizon Zimmer Biomet Holdings is expected to under-perform the CONSOL Energy. But the stock apears to be less risky and, when comparing its historical volatility, Zimmer Biomet Holdings is 1.71 times less risky than CONSOL Energy. The stock trades about -0.03 of its potential returns per unit of risk. The CONSOL Energy is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  7,957  in CONSOL Energy on September 24, 2024 and sell it today you would earn a total of  2,393  from holding CONSOL Energy or generate 30.07% return on investment over 90 days.

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

Zimmer Biomet Holdings  vs.  CONSOL Energy

Zimmer Biomet Holdings

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Zimmer Biomet Holdings are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Zimmer Biomet is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the 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 Zimmer Biomet and CONSOL Energy

The main advantage of trading using opposite Zimmer Biomet and CONSOL Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Zimmer Biomet 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 Zimmer Biomet Holdings 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.