Correlation Between Earthstone Energy and Coastal Caribbean
Can any of the company-specific risk be diversified away by investing in both Earthstone Energy and Coastal Caribbean 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 Earthstone Energy and Coastal Caribbean into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Earthstone Energy and Coastal Caribbean Oils, you can compare the effects of market volatilities on Earthstone Energy and Coastal Caribbean 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 Earthstone Energy with a short position of Coastal Caribbean. Check out your portfolio center. Please also check ongoing floating volatility patterns of Earthstone Energy and Coastal Caribbean.
Diversification Opportunities for Earthstone Energy and Coastal Caribbean
-0.07 | Correlation Coefficient |
Good diversification
The 3 months correlation between Earthstone and Coastal is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding Earthstone Energy and Coastal Caribbean Oils in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Coastal Caribbean Oils and Earthstone 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 Earthstone Energy are associated (or correlated) with Coastal Caribbean. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Coastal Caribbean Oils has no effect on the direction of Earthstone Energy i.e., Earthstone Energy and Coastal Caribbean go up and down completely randomly.
Pair Corralation between Earthstone Energy and Coastal Caribbean
Given the investment horizon of 90 days Earthstone Energy is expected to generate 3.42 times less return on investment than Coastal Caribbean. But when comparing it to its historical volatility, Earthstone Energy is 8.27 times less risky than Coastal Caribbean. It trades about 0.19 of its potential returns per unit of risk. Coastal Caribbean Oils is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 0.01 in Coastal Caribbean Oils on August 31, 2024 and sell it today you would earn a total of 0.00 from holding Coastal Caribbean Oils or generate 0.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 96.88% |
| Values | Daily Returns |
Earthstone Energy vs. Coastal Caribbean Oils
Performance |
| Timeline |
| Earthstone Energy |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
| Coastal Caribbean Oils |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Earthstone Energy and Coastal Caribbean Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Earthstone Energy and Coastal Caribbean
The main advantage of trading using opposite Earthstone Energy and Coastal Caribbean positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Earthstone Energy position performs unexpectedly, Coastal Caribbean 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 Coastal Caribbean will offset losses from the drop in Coastal Caribbean's long position.| Earthstone Energy vs. Vital Energy | Earthstone Energy vs. Comstock Resources | Earthstone Energy vs. Magnolia Oil Gas | Earthstone Energy vs. Obsidian Energy |
| Coastal Caribbean vs. Strat Petroleum | Coastal Caribbean vs. Imperial Res | Coastal Caribbean vs. Century Petroleum 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .
Other Complementary Tools
| Equity Valuation Check real value of public entities based on technical and fundamental data | |
| Bollinger Bands Use Bollinger Bands indicator to analyze target price for a given investing horizon | |
| Portfolio Comparator Compare the composition, asset allocations and performance of any two portfolios in your account | |
| Idea Optimizer Use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio | |
| Money Managers Screen money managers from public funds and ETFs managed around the world |