Correlation Between Peabody Energy and Nacco Industries

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Can any of the company-specific risk be diversified away by investing in both Peabody Energy and Nacco Industries 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 Nacco Industries 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 Nacco Industries, you can compare the effects of market volatilities on Peabody Energy and Nacco Industries 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 Nacco Industries. Check out your portfolio center. Please also check ongoing floating volatility patterns of Peabody Energy and Nacco Industries.

Diversification Opportunities for Peabody Energy and Nacco Industries

0.23
  Correlation Coefficient

Modest diversification

The 3 months correlation between Peabody and Nacco is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding Peabody Energy Corp and Nacco Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nacco Industries 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 Nacco Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nacco Industries has no effect on the direction of Peabody Energy i.e., Peabody Energy and Nacco Industries go up and down completely randomly.

Pair Corralation between Peabody Energy and Nacco Industries

Considering the 90-day investment horizon Peabody Energy Corp is expected to under-perform the Nacco Industries. In addition to that, Peabody Energy is 1.13 times more volatile than Nacco Industries. It trades about -0.09 of its total potential returns per unit of risk. Nacco Industries is currently generating about -0.02 per unit of volatility. If you would invest  4,223  in Nacco Industries on April 7, 2022 and sell it today you would lose (594.00)  from holding Nacco Industries or give up 14.07% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

Peabody Energy Corp  vs.  Nacco Industries

 Performance (%) 
      Timeline 
Peabody Energy Corp 
Peabody Performance
0 of 100
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 weak performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in August 2022. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Structure and Payout Changes

Forward Annual Dividend Yield
0.17
Forward Annual Dividend Rate
0.58
Dividend Date
2019-11-29
Ex Dividend Date
2019-10-29

Peabody Price Channel

Nacco Industries 
Nacco Performance
0 of 100
Over the last 90 days Nacco Industries has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unsteady performance, the Stock's fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Structure and Payout Changes

Forward Annual Dividend Yield
0.021
Payout Ratio
0.0823
Last Split Factor
4377:1000
Forward Annual Dividend Rate
0.83
Dividend Date
2022-06-15
Ex Dividend Date
2022-05-27
Last Split Date
2017-10-02

Nacco Price Channel

Peabody Energy and Nacco Industries Volatility Contrast

 Predicted Return Density 
      Returns 

Pair Trading with Peabody Energy and Nacco Industries

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

Nacco Industries

Pair trading matchups for Nacco Industries

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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..

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