Correlation Between Kosmos Energy and Diamondback Energy
Can any of the company-specific risk be diversified away by investing in both Kosmos Energy and Diamondback 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 Kosmos Energy and Diamondback Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Kosmos Energy and Diamondback Energy, you can compare the effects of market volatilities on Kosmos Energy and Diamondback 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 Kosmos Energy with a short position of Diamondback Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Kosmos Energy and Diamondback Energy.
Diversification Opportunities for Kosmos Energy and Diamondback Energy
0.79 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Kosmos and Diamondback is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Kosmos Energy and Diamondback Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Diamondback Energy and Kosmos 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 Kosmos Energy are associated (or correlated) with Diamondback Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Diamondback Energy has no effect on the direction of Kosmos Energy i.e., Kosmos Energy and Diamondback Energy go up and down completely randomly.
Pair Corralation between Kosmos Energy and Diamondback Energy
Considering the 90-day investment horizon Kosmos Energy is expected to generate 1.06 times less return on investment than Diamondback Energy. In addition to that, Kosmos Energy is 1.74 times more volatile than Diamondback Energy. It trades about 0.02 of its total potential returns per unit of risk. Diamondback Energy is currently generating about 0.04 per unit of volatility. If you would invest 18,023 in Diamondback Energy on August 24, 2024 and sell it today you would earn a total of 247.00 from holding Diamondback Energy or generate 1.37% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Kosmos Energy vs. Diamondback Energy
Performance |
| Timeline |
| Kosmos Energy |
| Diamondback Energy |
Kosmos Energy and Diamondback Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Kosmos Energy and Diamondback Energy
The main advantage of trading using opposite Kosmos Energy and Diamondback Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Kosmos Energy position performs unexpectedly, Diamondback 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 Diamondback Energy will offset losses from the drop in Diamondback Energy's long position.| Kosmos Energy vs. Matador Resources | Kosmos Energy vs. Murphy Oil | Kosmos Energy vs. Civitas Resources | Kosmos Energy vs. Magnolia Oil Gas |
| Diamondback Energy vs. Devon Energy | Diamondback Energy vs. Coterra Energy | Diamondback Energy vs. EOG Resources | Diamondback 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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