Correlation Between Promotora and Cabot Oil
Can any of the company-specific risk be diversified away by investing in both Promotora and Cabot Oil 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 Promotora and Cabot Oil into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Promotora y Operadora and Cabot Oil Gas, you can compare the effects of market volatilities on Promotora and Cabot Oil 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 Promotora with a short position of Cabot Oil. Check out your portfolio center. Please also check ongoing floating volatility patterns of Promotora and Cabot Oil.
Diversification Opportunities for Promotora and Cabot Oil
Very poor diversification
The 3 months correlation between Promotora and Cabot is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Promotora y Operadora and Cabot Oil Gas in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cabot Oil Gas and Promotora 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 Promotora y Operadora are associated (or correlated) with Cabot Oil. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cabot Oil Gas has no effect on the direction of Promotora i.e., Promotora and Cabot Oil go up and down completely randomly.
Pair Corralation between Promotora and Cabot Oil
Assuming the 90 days trading horizon Promotora is expected to generate 1.24 times less return on investment than Cabot Oil. But when comparing it to its historical volatility, Promotora y Operadora is 1.37 times less risky than Cabot Oil. It trades about 0.24 of its potential returns per unit of risk. Cabot Oil Gas is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest 49,379 in Cabot Oil Gas on September 12, 2024 and sell it today you would earn a total of 4,921 from holding Cabot Oil Gas or generate 9.97% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 95.45% |
| Values | Daily Returns |
Promotora y Operadora vs. Cabot Oil Gas
Performance |
| Timeline |
| Promotora y Operadora |
| Cabot Oil Gas |
Promotora and Cabot Oil Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Promotora and Cabot Oil
The main advantage of trading using opposite Promotora and Cabot Oil positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Promotora position performs unexpectedly, Cabot Oil 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 Cabot Oil will offset losses from the drop in Cabot Oil's long position.| Promotora vs. Gruma SAB de | Promotora vs. Grupo Aeroportuario del | Promotora vs. Grupo Aeroportuario del | Promotora vs. Grupo Aeroportuario del |
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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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