Correlation Between Crescent Energy and Diversified Energy
Can any of the company-specific risk be diversified away by investing in both Crescent Energy and Diversified 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 Crescent Energy and Diversified Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Crescent Energy Co and Diversified Energy, you can compare the effects of market volatilities on Crescent Energy and Diversified 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 Crescent Energy with a short position of Diversified Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Crescent Energy and Diversified Energy.
Diversification Opportunities for Crescent Energy and Diversified Energy
0.86 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Crescent and Diversified is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Crescent Energy Co and Diversified Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Diversified Energy and Crescent 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 Crescent Energy Co are associated (or correlated) with Diversified Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Diversified Energy has no effect on the direction of Crescent Energy i.e., Crescent Energy and Diversified Energy go up and down completely randomly.
Pair Corralation between Crescent Energy and Diversified Energy
Given the investment horizon of 90 days Crescent Energy is expected to generate 1.75 times less return on investment than Diversified Energy. But when comparing it to its historical volatility, Crescent Energy Co is 1.35 times less risky than Diversified Energy. It trades about 0.46 of its potential returns per unit of risk. Diversified Energy is currently generating about 0.6 of returns per unit of risk over similar time horizon. If you would invest 1,179 in Diversified Energy on September 1, 2024 and sell it today you would earn a total of 457.00 from holding Diversified Energy or generate 38.76% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Crescent Energy Co vs. Diversified Energy
Performance |
| Timeline |
| Crescent Energy |
| Diversified Energy |
Crescent Energy and Diversified Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Crescent Energy and Diversified Energy
The main advantage of trading using opposite Crescent Energy and Diversified Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Crescent Energy position performs unexpectedly, Diversified 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 Diversified Energy will offset losses from the drop in Diversified Energy's long position.| Crescent Energy vs. Vital Energy | Crescent Energy vs. Permian Resources | Crescent Energy vs. Magnolia Oil Gas | Crescent Energy vs. Ring Energy |
| Diversified Energy vs. Epsilon Energy | Diversified Energy vs. Crescent Energy Co | Diversified Energy vs. Evolution Petroleum | Diversified Energy vs. XXL Energy Corp |
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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.
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