Correlation Between Peabody Energy and USWE SPORTS

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

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

Diversification Opportunities for Peabody Energy and USWE SPORTS

0.16

Correlation Coefficient

Peabody Energy  USWE SPORTS

Average diversification

The 3 months correlation between Peabody and USWE is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding Peabody Energy and USWE SPORTS AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on USWE SPORTS AB and Peabody 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 Peabody Energy are associated (or correlated) with USWE SPORTS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of USWE SPORTS AB has no effect on the direction of Peabody Energy i.e., Peabody Energy and USWE SPORTS go up and down completely randomly.

Pair Corralation between Peabody Energy and USWE SPORTS

Assuming the 90 days horizon Peabody Energy is expected to under-perform the USWE SPORTS. In addition to that, Peabody Energy is 1.1 times more volatile than USWE SPORTS AB. It trades about -0.14 of its total potential returns per unit of risk. USWE SPORTS AB is currently generating about 0.08 per unit of volatility. If you would invest  69.00  in USWE SPORTS AB on October 1, 2024 and sell it today you would earn a total of  5.00  from holding USWE SPORTS AB or generate 7.25% return on investment over 90 days.

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

Peabody Energy  vs.  USWE SPORTS AB

Peabody Energy

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Peabody Energy has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

USWE SPORTS AB

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in USWE SPORTS AB are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, USWE SPORTS reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Peabody Energy and USWE SPORTS

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

The idea behind Peabody Energy and USWE SPORTS AB 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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.