Correlation Between ConocoPhillips and Coterra Energy

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

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

Diversification Opportunities for ConocoPhillips and Coterra Energy

0.28

Correlation Coefficient

ConocoPhillips  Coterra Energy

Modest diversification

The 3 months correlation between ConocoPhillips and Coterra is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding ConocoPhillips and Coterra Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Coterra Energy and ConocoPhillips 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 ConocoPhillips 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 ConocoPhillips i.e., ConocoPhillips and Coterra Energy go up and down completely randomly.

Pair Corralation between ConocoPhillips and Coterra Energy

Considering the 90-day investment horizon ConocoPhillips is expected to under-perform the Coterra Energy. But the stock apears to be less risky and, when comparing its historical volatility, ConocoPhillips is 1.26 times less risky than Coterra Energy. The stock trades about -0.11 of its potential returns per unit of risk. The Coterra Energy is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  2,672  in Coterra Energy on November 28, 2024 and sell it today you would earn a total of  66.00  from holding Coterra Energy or generate 2.47% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

ConocoPhillips  vs.  Coterra Energy

ConocoPhillips

Risk-Adjusted Performance

Very Weak

Over the last 90 days ConocoPhillips has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest fragile performance, the Stock's basic indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

Coterra Energy

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Coterra Energy are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Coterra Energy is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with ConocoPhillips and Coterra Energy

The main advantage of trading using opposite ConocoPhillips and Coterra Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ConocoPhillips 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.

The idea behind ConocoPhillips and Coterra Energy 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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.