Correlation Between Coterra Energy and FAR
Can any of the company-specific risk be diversified away by investing in both Coterra Energy and FAR 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 FAR into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Coterra Energy and FAR Limited, you can compare the effects of market volatilities on Coterra Energy and FAR 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 FAR. Check out your portfolio center. Please also check ongoing floating volatility patterns of Coterra Energy and FAR.
Diversification Opportunities for Coterra Energy and FAR
-0.2 | Correlation Coefficient |
Good diversification
The 3 months correlation between Coterra and FAR is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding Coterra Energy and FAR Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FAR Limited 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 FAR. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FAR Limited has no effect on the direction of Coterra Energy i.e., Coterra Energy and FAR go up and down completely randomly.
Pair Corralation between Coterra Energy and FAR
Given the investment horizon of 90 days Coterra Energy is expected to generate 1.51 times more return on investment than FAR. However, Coterra Energy is 1.51 times more volatile than FAR Limited. It trades about 0.28 of its potential returns per unit of risk. FAR Limited is currently generating about -0.21 per unit of risk. If you would invest 2,372 in Coterra Energy on September 1, 2024 and sell it today you would earn a total of 300.00 from holding Coterra Energy or generate 12.65% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 95.45% |
| Values | Daily Returns |
Coterra Energy vs. FAR Limited
Performance |
| Timeline |
| Coterra Energy |
| FAR Limited |
Coterra Energy and FAR Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Coterra Energy and FAR
The main advantage of trading using opposite Coterra Energy and FAR positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Coterra Energy position performs unexpectedly, FAR 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 FAR will offset losses from the drop in FAR's long position.| 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..
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