Correlation Between California Resources and Coterra Energy
Can any of the company-specific risk be diversified away by investing in both California Resources and Coterra 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 California Resources and Coterra Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between California Resources Corp and Coterra Energy, you can compare the effects of market volatilities on California Resources and Coterra 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 California Resources with a short position of Coterra Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of California Resources and Coterra Energy.
Diversification Opportunities for California Resources and Coterra Energy
0.87 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between California and Coterra is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding California Resources Corp and Coterra Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Coterra Energy and California 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 California Resources Corp are associated (or correlated) with Coterra Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Coterra Energy has no effect on the direction of California Resources i.e., California Resources and Coterra Energy go up and down completely randomly.
Pair Corralation between California Resources and Coterra Energy
Considering the 90-day investment horizon California Resources Corp is expected to generate 0.96 times more return on investment than Coterra Energy. However, California Resources Corp is 1.04 times less risky than Coterra Energy. It trades about 0.32 of its potential returns per unit of risk. Coterra Energy is currently generating about 0.28 per unit of risk. If you would invest 5,197 in California Resources Corp on September 1, 2024 and sell it today you would earn a total of 719.00 from holding California Resources Corp or generate 13.83% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
California Resources Corp vs. Coterra Energy
Performance |
| Timeline |
| California Resources Corp |
| Coterra Energy |
California Resources and Coterra Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with California Resources and Coterra Energy
The main advantage of trading using opposite California Resources and Coterra Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if California Resources position performs unexpectedly, Coterra 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 Coterra Energy will offset losses from the drop in Coterra Energy's long position.| California Resources vs. Berry Petroleum Corp | California Resources vs. Magnolia Oil Gas | California Resources vs. Comstock Resources | California Resources vs. Gulfport Energy Operating |
| Coterra Energy vs. Devon Energy | Coterra Energy vs. Diamondback Energy | Coterra Energy vs. EOG Resources | Coterra Energy vs. ConocoPhillips |
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 Bonds Directory module to find actively traded corporate debentures issued by US companies.
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