Correlation Between Coterra Energy and Hess

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

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

Diversification Opportunities for Coterra Energy and Hess

0.83

Correlation Coefficient

Coterra Energy  Hess

Very poor diversification

The 3 months correlation between Coterra and Hess is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Coterra Energy and Hess Corp. in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hess 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 Hess. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hess has no effect on the direction of Coterra Energy i.e., Coterra Energy and Hess go up and down completely randomly.

Pair Corralation between Coterra Energy and Hess

Given the investment horizon of 90 days Coterra Energy is expected to generate 1.54 times less return on investment than Hess. In addition to that, Coterra Energy is 1.22 times more volatile than Hess Corporation. It trades about 0.12 of its total potential returns per unit of risk. Hess Corporation is currently generating about 0.22 per unit of volatility. If you would invest  13,027  in Hess Corporation on December 28, 2024 and sell it today you would earn a total of  2,801  from holding Hess Corporation or generate 21.5% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.36%
Values	Daily Returns

Coterra Energy  vs.  Hess 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.

Hess

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Hess Corporation are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile technical and fundamental indicators, Hess unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Coterra Energy and Hess

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

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