Correlation Between GM and Coterra Energy
Can any of the company-specific risk be diversified away by investing in both GM 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 GM and Coterra Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and Coterra Energy, you can compare the effects of market volatilities on GM 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 GM with a short position of Coterra Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Coterra Energy.
Diversification Opportunities for GM and Coterra Energy
0.63 | Correlation Coefficient |
Poor diversification
The 3 months correlation between GM and Coterra is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Coterra Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Coterra Energy and GM 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 General Motors 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 GM i.e., GM and Coterra Energy go up and down completely randomly.
Pair Corralation between GM and Coterra Energy
Allowing for the 90-day total investment horizon GM is expected to generate 1.51 times less return on investment than Coterra Energy. In addition to that, GM is 1.01 times more volatile than Coterra Energy. It trades about 0.26 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 | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
General Motors vs. Coterra Energy
Performance |
| Timeline |
| General Motors |
| Coterra Energy |
GM and Coterra Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and Coterra Energy
The main advantage of trading using opposite GM and Coterra Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM 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 General Motors 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.
Other Complementary Tools
| Share Portfolio Track or share privately all of your investments from the convenience of any device | |
| CEOs Directory Screen CEOs from public companies around the world | |
| Stock Tickers Use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites | |
| Bollinger Bands Use Bollinger Bands indicator to analyze target price for a given investing horizon | |
| Global Markets Map Get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes |