Correlation Between Coterra Energy and Cross Timbers
Can any of the company-specific risk be diversified away by investing in both Coterra Energy and Cross Timbers 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 Coterra Energy and Cross Timbers into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Coterra Energy and Cross Timbers Royalty, you can compare the effects of market volatilities on Coterra Energy and Cross Timbers 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 Coterra Energy with a short position of Cross Timbers. Check out your portfolio center. Please also check ongoing floating volatility patterns of Coterra Energy and Cross Timbers.
Diversification Opportunities for Coterra Energy and Cross Timbers
0.43 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Coterra and Cross is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Coterra Energy and Cross Timbers Royalty in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cross Timbers Royalty and Coterra 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 Coterra Energy are associated (or correlated) with Cross Timbers. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cross Timbers Royalty has no effect on the direction of Coterra Energy i.e., Coterra Energy and Cross Timbers go up and down completely randomly.
Pair Corralation between Coterra Energy and Cross Timbers
Given the investment horizon of 90 days Coterra Energy is expected to generate 0.74 times more return on investment than Cross Timbers. However, Coterra Energy is 1.35 times less risky than Cross Timbers. It trades about 0.19 of its potential returns per unit of risk. Cross Timbers Royalty is currently generating about 0.09 per unit of risk. If you would invest 2,355 in Coterra Energy on August 28, 2024 and sell it today you would earn a total of 323.00 from holding Coterra Energy or generate 13.72% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Coterra Energy vs. Cross Timbers Royalty
Performance |
| Timeline |
| Coterra Energy |
| Cross Timbers Royalty |
Coterra Energy and Cross Timbers Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Coterra Energy and Cross Timbers
The main advantage of trading using opposite Coterra Energy and Cross Timbers positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Coterra Energy position performs unexpectedly, Cross Timbers 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 Cross Timbers will offset losses from the drop in Cross Timbers' long position.| Coterra Energy vs. Devon Energy | Coterra Energy vs. Diamondback Energy | Coterra Energy vs. EOG Resources | Coterra Energy vs. ConocoPhillips |
| Cross Timbers vs. Sabine Royalty Trust | Cross Timbers vs. Mesa Royalty Trust | Cross Timbers vs. San Juan Basin | Cross Timbers vs. Permian Basin Royalty |
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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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