Correlation Between MDM Permian and Coterra Energy
Can any of the company-specific risk be diversified away by investing in both MDM Permian 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 MDM Permian and Coterra Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between MDM Permian and Coterra Energy, you can compare the effects of market volatilities on MDM Permian 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 MDM Permian with a short position of Coterra Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of MDM Permian and Coterra Energy.
Diversification Opportunities for MDM Permian and Coterra Energy
0.3 | Correlation Coefficient |
Weak diversification
The 3 months correlation between MDM and Coterra is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding MDM Permian and Coterra Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Coterra Energy and MDM Permian 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 MDM Permian 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 MDM Permian i.e., MDM Permian and Coterra Energy go up and down completely randomly.
Pair Corralation between MDM Permian and Coterra Energy
Given the investment horizon of 90 days MDM Permian is expected to generate 5.46 times more return on investment than Coterra Energy. However, MDM Permian is 5.46 times more volatile than Coterra Energy. It trades about 0.08 of its potential returns per unit of risk. Coterra Energy is currently generating about 0.29 per unit of risk. If you would invest 1.00 in MDM Permian on August 28, 2024 and sell it today you would earn a total of 0.08 from holding MDM Permian or generate 8.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
MDM Permian vs. Coterra Energy
Performance |
| Timeline |
| MDM Permian |
| Coterra Energy |
MDM Permian and Coterra Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with MDM Permian and Coterra Energy
The main advantage of trading using opposite MDM Permian and Coterra Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MDM Permian 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.| MDM Permian vs. Permian Resources | MDM Permian vs. Devon Energy | MDM Permian vs. EOG Resources | MDM Permian vs. Coterra 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 Global Correlations module to find global opportunities by holding instruments from different markets.
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