Correlation Between Coterra Energy and Gulf Coast
Can any of the company-specific risk be diversified away by investing in both Coterra Energy and Gulf Coast 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 Gulf Coast into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Coterra Energy and Gulf Coast, you can compare the effects of market volatilities on Coterra Energy and Gulf Coast 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 Gulf Coast. Check out your portfolio center. Please also check ongoing floating volatility patterns of Coterra Energy and Gulf Coast.
Diversification Opportunities for Coterra Energy and Gulf Coast
0.7 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Coterra and Gulf is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Coterra Energy and Gulf Coast in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gulf Coast 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 Gulf Coast. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gulf Coast has no effect on the direction of Coterra Energy i.e., Coterra Energy and Gulf Coast go up and down completely randomly.
Pair Corralation between Coterra Energy and Gulf Coast
Given the investment horizon of 90 days Coterra Energy is expected to generate 3.57 times less return on investment than Gulf Coast. But when comparing it to its historical volatility, Coterra Energy is 2.22 times less risky than Gulf Coast. It trades about 0.25 of its potential returns per unit of risk. Gulf Coast is currently generating about 0.4 of returns per unit of risk over similar time horizon. If you would invest 1.30 in Gulf Coast on August 31, 2024 and sell it today you would earn a total of 0.60 from holding Gulf Coast or generate 46.15% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Coterra Energy vs. Gulf Coast
Performance |
| Timeline |
| Coterra Energy |
| Gulf Coast |
Coterra Energy and Gulf Coast Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Coterra Energy and Gulf Coast
The main advantage of trading using opposite Coterra Energy and Gulf Coast positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Coterra Energy position performs unexpectedly, Gulf Coast 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 Gulf Coast will offset losses from the drop in Gulf Coast's long position.| Coterra Energy vs. Devon Energy | Coterra Energy vs. Diamondback Energy | Coterra Energy vs. EOG Resources | Coterra Energy vs. ConocoPhillips |
| Gulf Coast vs. San Leon Energy | Gulf Coast vs. Enwell Energy plc | Gulf Coast vs. Dno ASA | Gulf Coast vs. PetroShale |
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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.
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