Correlation Between Falcon Oil and Coterra Energy
Can any of the company-specific risk be diversified away by investing in both Falcon Oil 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 Falcon Oil and Coterra Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Falcon Oil Gas and Coterra Energy, you can compare the effects of market volatilities on Falcon Oil 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 Falcon Oil with a short position of Coterra Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Falcon Oil and Coterra Energy.
Diversification Opportunities for Falcon Oil and Coterra Energy
0.61 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Falcon and Coterra is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Falcon Oil Gas and Coterra Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Coterra Energy and Falcon Oil 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 Falcon Oil Gas 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 Falcon Oil i.e., Falcon Oil and Coterra Energy go up and down completely randomly.
Pair Corralation between Falcon Oil and Coterra Energy
Assuming the 90 days horizon Falcon Oil Gas is expected to generate 7.09 times more return on investment than Coterra Energy. However, Falcon Oil is 7.09 times more volatile than Coterra Energy. It trades about 0.35 of its potential returns per unit of risk. Coterra Energy is currently generating about 0.68 per unit of risk. If you would invest 5.08 in Falcon Oil Gas on October 23, 2024 and sell it today you would earn a total of 3.92 from holding Falcon Oil Gas or generate 77.17% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 94.74% |
| Values | Daily Returns |
Falcon Oil Gas vs. Coterra Energy
Performance |
| Timeline |
| Falcon Oil Gas |
| Coterra Energy |
Falcon Oil and Coterra Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Falcon Oil and Coterra Energy
The main advantage of trading using opposite Falcon Oil and Coterra Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Falcon Oil 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.| Falcon Oil vs. Gulf Keystone Petroleum | Falcon Oil vs. Maverick Energy Group | Falcon Oil vs. North European Oil | Falcon Oil vs. SandRidge Energy |
| 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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