Correlation Between California Resources and Tamboran Resources

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

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

Diversification Opportunities for California Resources and Tamboran Resources

-0.45

Correlation Coefficient

California Resources  Tamboran Resources

Very good diversification

The 3 months correlation between California and Tamboran is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding California Resources Corp and Tamboran Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tamboran Resources and California Resources 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 California Resources Corp are associated (or correlated) with Tamboran Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tamboran Resources has no effect on the direction of California Resources i.e., California Resources and Tamboran Resources go up and down completely randomly.

Pair Corralation between California Resources and Tamboran Resources

Considering the 90-day investment horizon California Resources Corp is expected to generate 1.01 times more return on investment than Tamboran Resources. However, California Resources is 1.01 times more volatile than Tamboran Resources. It trades about 0.12 of its potential returns per unit of risk. Tamboran Resources is currently generating about -0.05 per unit of risk. If you would invest  4,846  in California Resources Corp on September 12, 2024 and sell it today you would earn a total of  836.00  from holding California Resources Corp or generate 17.25% return on investment over 90 days.

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

California Resources Corp  vs.  Tamboran Resources

California Resources Corp

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in California Resources Corp are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak basic indicators, California Resources exhibited solid returns over the last few months and may actually be approaching a breakup point.

Tamboran Resources

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Tamboran Resources has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's fundamental drivers remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with California Resources and Tamboran Resources

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

The idea behind California Resources Corp and Tamboran 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.