Correlation Between Coterra Energy and EQT

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

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

Diversification Opportunities for Coterra Energy and EQT

0.93

Correlation Coefficient

Coterra Energy  EQT

Almost no diversification

The 3 months correlation between Coterra and EQT is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Coterra Energy and EQT Corp. in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EQT Corporation and Coterra 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 Coterra Energy are associated (or correlated) with EQT. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EQT Corporation has no effect on the direction of Coterra Energy i.e., Coterra Energy and EQT go up and down completely randomly.

Pair Corralation between Coterra Energy and EQT

Given the investment horizon of 90 days Coterra Energy is expected to generate 1.08 times less return on investment than EQT. But when comparing it to its historical volatility, Coterra Energy is 1.43 times less risky than EQT. It trades about 0.12 of its potential returns per unit of risk. EQT Corporation is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  4,645  in EQT Corporation on December 28, 2024 and sell it today you would earn a total of  587.00  from holding EQT Corporation or generate 12.64% return on investment over 90 days.

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

Coterra Energy  vs.  EQT Corp.

Coterra Energy

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Coterra Energy are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unfluctuating basic indicators, Coterra Energy sustained solid returns over the last few months and may actually be approaching a breakup point.

EQT Corporation

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in EQT Corporation are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating basic indicators, EQT unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Coterra Energy and EQT

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

The idea behind Coterra Energy and EQT Corporation 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.