Correlation Between Ford and Coterra Energy
Can any of the company-specific risk be diversified away by investing in both Ford and Coterra 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 Ford and Coterra Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ford Motor and Coterra Energy, you can compare the effects of market volatilities on Ford and Coterra 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 Ford with a short position of Coterra Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and Coterra Energy.
Diversification Opportunities for Ford and Coterra Energy
0.46 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Ford and Coterra is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Coterra Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Coterra Energy and Ford 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 Ford Motor are associated (or correlated) with Coterra Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Coterra Energy has no effect on the direction of Ford i.e., Ford and Coterra Energy go up and down completely randomly.
Pair Corralation between Ford and Coterra Energy
Taking into account the 90-day investment horizon Ford is expected to generate 40.95 times less return on investment than Coterra Energy. In addition to that, Ford is 1.38 times more volatile than Coterra Energy. It trades about 0.01 of its total potential returns per unit of risk. Coterra Energy is currently generating about 0.4 per unit of volatility. If you would invest 2,357 in Coterra Energy on August 27, 2024 and sell it today you would earn a total of 406.00 from holding Coterra Energy or generate 17.23% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Ford Motor vs. Coterra Energy
Performance |
| Timeline |
| Ford Motor |
| Coterra Energy |
Ford and Coterra Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ford and Coterra Energy
The main advantage of trading using opposite Ford and Coterra Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, Coterra 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 Coterra Energy will offset losses from the drop in Coterra Energy's long position.The idea behind Ford Motor and Coterra Energy pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.
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