Correlation Between Consol Energy and Flexible Solutions

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

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

Diversification Opportunities for Consol Energy and Flexible Solutions

0.83

Correlation Coefficient

Consol Energy  Flexible Solutions

Very poor diversification

The 3 months correlation between Consol and Flexible is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Consol Energy and Flexible Solutions Internation in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Flexible Solutions and Consol Energy 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 Consol Energy are associated (or correlated) with Flexible Solutions. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Flexible Solutions has no effect on the direction of Consol Energy i.e., Consol Energy and Flexible Solutions go up and down completely randomly.

Pair Corralation between Consol Energy and Flexible Solutions

Given the investment horizon of 90 days Consol Energy is expected to generate 0.68 times more return on investment than Flexible Solutions. However, Consol Energy is 1.48 times less risky than Flexible Solutions. It trades about 0.29 of its potential returns per unit of risk. Flexible Solutions International is currently generating about 0.1 per unit of risk. If you would invest  10,909  in Consol Energy on September 2, 2024 and sell it today you would earn a total of  2,161  from holding Consol Energy or generate 19.81% return on investment over 90 days.

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

Consol Energy  vs.  Flexible Solutions Internation

Consol Energy

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Consol Energy are ranked lower than 17 (%) 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.

Flexible Solutions

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Flexible Solutions International are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite fairly unsteady basic indicators, Flexible Solutions demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Consol Energy and Flexible Solutions

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

The idea behind Consol Energy and Flexible Solutions International 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.