Correlation Between Comstock Resources and Expand Energy

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

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

Diversification Opportunities for Comstock Resources and Expand Energy

0.88

Correlation Coefficient

Comstock Resources  Expand Energy

Very poor diversification

The 3 months correlation between Comstock and Expand is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Comstock Resources and Expand Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Expand Energy and Comstock 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 Comstock Resources are associated (or correlated) with Expand Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Expand Energy has no effect on the direction of Comstock Resources i.e., Comstock Resources and Expand Energy go up and down completely randomly.

Pair Corralation between Comstock Resources and Expand Energy

Considering the 90-day investment horizon Comstock Resources is expected to generate 2.68 times more return on investment than Expand Energy. However, Comstock Resources is 2.68 times more volatile than Expand Energy. It trades about 0.22 of its potential returns per unit of risk. Expand Energy is currently generating about 0.15 per unit of risk. If you would invest  1,389  in Comstock Resources on September 19, 2024 and sell it today you would earn a total of  220.00  from holding Comstock Resources or generate 15.84% return on investment over 90 days.

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

Comstock Resources  vs.  Expand Energy

Comstock Resources

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Comstock Resources are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Despite quite unsteady basic indicators, Comstock Resources disclosed solid returns over the last few months and may actually be approaching a breakup point.

Expand Energy

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Expand Energy are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak technical and fundamental indicators, Expand Energy showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Comstock Resources and Expand Energy

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

The idea behind Comstock Resources and Expand 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.

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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.