Correlation Between SunCoke Energy and Alpha Metallurgical

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

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

Diversification Opportunities for SunCoke Energy and Alpha Metallurgical

0.72

Correlation Coefficient

SunCoke Energy  Alpha Metallurgical

Poor diversification

The 3 months correlation between SunCoke and Alpha is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding SunCoke Energy and Alpha Metallurgical Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alpha Metallurgical and SunCoke 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 SunCoke Energy are associated (or correlated) with Alpha Metallurgical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alpha Metallurgical has no effect on the direction of SunCoke Energy i.e., SunCoke Energy and Alpha Metallurgical go up and down completely randomly.

Pair Corralation between SunCoke Energy and Alpha Metallurgical

Considering the 90-day investment horizon SunCoke Energy is expected to generate 1.09 times more return on investment than Alpha Metallurgical. However, SunCoke Energy is 1.09 times more volatile than Alpha Metallurgical Resources. It trades about 0.21 of its potential returns per unit of risk. Alpha Metallurgical Resources is currently generating about 0.08 per unit of risk. If you would invest  834.00  in SunCoke Energy on September 3, 2024 and sell it today you would earn a total of  412.00  from holding SunCoke Energy or generate 49.4% return on investment over 90 days.

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

SunCoke Energy  vs.  Alpha Metallurgical Resources

SunCoke Energy

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in SunCoke Energy are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, SunCoke Energy exhibited solid returns over the last few months and may actually be approaching a breakup point.

Alpha Metallurgical

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Alpha Metallurgical Resources are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Even with relatively unsteady primary indicators, Alpha Metallurgical reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with SunCoke Energy and Alpha Metallurgical

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

The idea behind SunCoke Energy and Alpha Metallurgical Resources 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.