Correlation Between Peabody Energy and Hallador Energy

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

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

Diversification Opportunities for Peabody Energy and Hallador Energy

0.87

Correlation Coefficient

Peabody Energy  Hallador Energy

Very poor diversification

The 3 months correlation between Peabody and Hallador is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Peabody Energy Corp and Hallador Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hallador Energy 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 Corp are associated (or correlated) with Hallador Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hallador Energy has no effect on the direction of Peabody Energy i.e., Peabody Energy and Hallador Energy go up and down completely randomly.

Pair Corralation between Peabody Energy and Hallador Energy

Considering the 90-day investment horizon Peabody Energy Corp is expected to under-perform the Hallador Energy. But the stock apears to be less risky and, when comparing its historical volatility, Peabody Energy Corp is 2.27 times less risky than Hallador Energy. The stock trades about -0.05 of its potential returns per unit of risk. The Hallador Energy is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  491.00  in Hallador Energy on January 25, 2024 and sell it today you would lose (7.00) from holding Hallador Energy or give up 1.43% of portfolio value over 90 days.

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

Peabody Energy Corp  vs.  Hallador Energy

Peabody Energy Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Peabody Energy Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Hallador Energy

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hallador Energy has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in May 2024. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Peabody Energy and Hallador Energy

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

The idea behind Peabody Energy Corp and Hallador 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.