Correlation Between Houston American and Crescent Energy
Can any of the company-specific risk be diversified away by investing in both Houston American and Crescent 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 Houston American and Crescent Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Houston American Energy and Crescent Energy Co, you can compare the effects of market volatilities on Houston American and Crescent 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 Houston American with a short position of Crescent Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Houston American and Crescent Energy.
Diversification Opportunities for Houston American and Crescent Energy
0.8 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Houston and Crescent is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Houston American Energy and Crescent Energy Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Crescent Energy and Houston American 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 Houston American Energy are associated (or correlated) with Crescent Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Crescent Energy has no effect on the direction of Houston American i.e., Houston American and Crescent Energy go up and down completely randomly.
Pair Corralation between Houston American and Crescent Energy
Given the investment horizon of 90 days Houston American is expected to generate 4.27 times less return on investment than Crescent Energy. In addition to that, Houston American is 2.27 times more volatile than Crescent Energy Co. It trades about 0.05 of its total potential returns per unit of risk. Crescent Energy Co is currently generating about 0.5 per unit of volatility. If you would invest 1,210 in Crescent Energy Co on August 28, 2024 and sell it today you would earn a total of 275.00 from holding Crescent Energy Co or generate 22.73% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Houston American Energy vs. Crescent Energy Co
Performance |
| Timeline |
| Houston American Energy |
| Crescent Energy |
Houston American and Crescent Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Houston American and Crescent Energy
The main advantage of trading using opposite Houston American and Crescent Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Houston American position performs unexpectedly, Crescent 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 Crescent Energy will offset losses from the drop in Crescent Energy's long position.| Houston American vs. ConocoPhillips | Houston American vs. Occidental Petroleum | Houston American vs. EOG Resources | Houston American vs. Coterra Energy |
| Crescent Energy vs. Vital Energy | Crescent Energy vs. Permian Resources | Crescent Energy vs. Magnolia Oil Gas | Crescent Energy vs. Ring Energy |
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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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