Correlation Between Chord Energy and California Resources

Can any of the company-specific risk be diversified away by investing in both Chord Energy and California Resources 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 Chord Energy and California Resources into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Chord Energy Corp and California Resources, you can compare the effects of market volatilities on Chord Energy and California Resources 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 Chord Energy with a short position of California Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of Chord Energy and California Resources.

Diversification Opportunities for Chord Energy and California Resources

-0.48

Correlation Coefficient

Chord Energy  California Resources

Very good diversification

The 3 months correlation between Chord and California is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding Chord Energy Corp and California Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on California Resources and Chord 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 Chord Energy Corp are associated (or correlated) with California Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of California Resources has no effect on the direction of Chord Energy i.e., Chord Energy and California Resources go up and down completely randomly.

Pair Corralation between Chord Energy and California Resources

Given the investment horizon of 90 days Chord Energy is expected to generate 13.86 times less return on investment than California Resources. But when comparing it to its historical volatility, Chord Energy Corp is 4.03 times less risky than California Resources. It trades about 0.01 of its potential returns per unit of risk. California Resources is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  1,500  in California Resources on October 11, 2024 and sell it today you would earn a total of  212.00  from holding California Resources or generate 14.13% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	89.9%
Values	Daily Returns

Chord Energy Corp  vs.  California Resources

Chord Energy Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Chord Energy Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest inconsistent performance, the Stock's basic indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

California Resources

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days California Resources has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly fragile basic indicators, California Resources showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Chord Energy and California Resources

The main advantage of trading using opposite Chord Energy and California Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Chord Energy position performs unexpectedly, California Resources 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 California Resources will offset losses from the drop in California Resources' long position.

The idea behind Chord Energy Corp and California Resources 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.

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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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.