Peabody and Commercial Metals Co.

The equity of Peabody has jumped relative to that of Commercial Metals. The graph below shows both plotted in the same graph (top pane), and their ratio (bottom pane):



This phenomenon est recent: the graph below shows that the pair has been diverging from its historical relationship. The blue points correspond to that last 30 days or so, and the yellow points to the previous 5 months.



The cost of protection on Peabody, however, is higher than that on CMC:



This may indicate that Peabody's equity is rich relative to that of CMC. (We can't however exclude the possibility of a change of correlation regime; we would need to look deeper at fundamentals and at recent news to exclude the option.)

Alternatively, these observations may tell us that market players expect a takeover of BTU, which would explain the sudden premium on its equity and its relatively higher CDS spread.