Correlation Between Consol Energy and New Providence

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

By analyzing existing cross correlation between Consol Energy and New Providence Acquisition, you can compare the effects of market volatilities on Consol Energy and New Providence 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 New Providence. Check out your portfolio center. Please also check ongoing floating volatility patterns of Consol Energy and New Providence.

Diversification Opportunities for Consol Energy and New Providence

0.34

Correlation Coefficient

Consol Energy  New Providence

Weak diversification

The 3 months correlation between Consol and New is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding Consol Energy and New Providence Acquisition in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on New Providence Acqui 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 New Providence. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of New Providence Acqui has no effect on the direction of Consol Energy i.e., Consol Energy and New Providence go up and down completely randomly.

Pair Corralation between Consol Energy and New Providence

Given the investment horizon of 90 days Consol Energy is expected to generate 1.31 times more return on investment than New Providence. However, Consol Energy is 1.31 times more volatile than New Providence Acquisition. It trades about 0.22 of its potential returns per unit of risk. New Providence Acquisition is currently generating about 0.03 per unit of risk. If you would invest  9,552  in Consol Energy on September 2, 2024 and sell it today you would earn a total of  3,518  from holding Consol Energy or generate 36.83% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	79.69%
Values	Daily Returns

Consol Energy  vs.  New Providence Acquisition

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.

New Providence Acqui

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days New Providence Acquisition has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable fundamental drivers, New Providence is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Consol Energy and New Providence

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

The idea behind Consol Energy and New Providence Acquisition 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.