Correlation Between Coterra Energy and FAR

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

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

Diversification Opportunities for Coterra Energy and FAR

0.46

Correlation Coefficient

Coterra Energy  FAR

Very weak diversification

The 3 months correlation between Coterra and FAR is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Coterra Energy and FAR Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FAR Limited 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 FAR. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FAR Limited has no effect on the direction of Coterra Energy i.e., Coterra Energy and FAR go up and down completely randomly.

Pair Corralation between Coterra Energy and FAR

Given the investment horizon of 90 days Coterra Energy is expected to under-perform the FAR. In addition to that, Coterra Energy is 1.18 times more volatile than FAR Limited. It trades about -0.16 of its total potential returns per unit of risk. FAR Limited is currently generating about 0.1 per unit of volatility. If you would invest  32.00  in FAR Limited on December 4, 2024 and sell it today you would earn a total of  1.00  from holding FAR Limited or generate 3.13% return on investment over 90 days.

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

Coterra Energy  vs.  FAR Limited

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.

FAR Limited

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in FAR Limited are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, FAR reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Coterra Energy and FAR

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

The idea behind Coterra Energy and FAR Limited 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.