Correlation Between CNX Resources and Warrior Met

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

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

Diversification Opportunities for CNX Resources and Warrior Met

0.38

Correlation Coefficient

CNX Resources  Warrior Met

Weak diversification

The 3 months correlation between CNX and Warrior is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding CNX Resources Corp and Warrior Met Coal in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Warrior Met Coal and CNX Resources 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 CNX Resources Corp are associated (or correlated) with Warrior Met. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Warrior Met Coal has no effect on the direction of CNX Resources i.e., CNX Resources and Warrior Met go up and down completely randomly.

Pair Corralation between CNX Resources and Warrior Met

Considering the 90-day investment horizon CNX Resources is expected to generate 3.63 times less return on investment than Warrior Met. But when comparing it to its historical volatility, CNX Resources Corp is 1.65 times less risky than Warrior Met. It trades about 0.06 of its potential returns per unit of risk. Warrior Met Coal is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  4,912  in Warrior Met Coal on January 30, 2024 and sell it today you would earn a total of  2,101  from holding Warrior Met Coal or generate 42.77% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	99.19%
Values	Daily Returns

CNX Resources Corp  vs.  Warrior Met Coal

CNX Resources Corp

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in CNX Resources Corp are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating basic indicators, CNX Resources showed solid returns over the last few months and may actually be approaching a breakup point.

Warrior Met Coal

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Warrior Met Coal are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady fundamental indicators, Warrior Met may actually be approaching a critical reversion point that can send shares even higher in May 2024.

Pair Trading with CNX Resources and Warrior Met

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

The idea behind CNX Resources Corp and Warrior Met Coal 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.