Correlation Between Coterra Energy and Range Resources

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

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

Diversification Opportunities for Coterra Energy and Range Resources

0.95

Correlation Coefficient

Coterra Energy  Range Resources

Almost no diversification

The 3 months correlation between Coterra and Range is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding Coterra Energy and Range Resources Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Range Resources Corp 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 Range Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Range Resources Corp has no effect on the direction of Coterra Energy i.e., Coterra Energy and Range Resources go up and down completely randomly.

Pair Corralation between Coterra Energy and Range Resources

Given the investment horizon of 90 days Coterra Energy is expected to generate 0.78 times more return on investment than Range Resources. However, Coterra Energy is 1.29 times less risky than Range Resources. It trades about 0.12 of its potential returns per unit of risk. Range Resources Corp is currently generating about 0.06 per unit of risk. If you would invest  2,531  in Coterra Energy on December 28, 2024 and sell it today you would earn a total of  321.00  from holding Coterra Energy or generate 12.68% return on investment over 90 days.

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

Coterra Energy  vs.  Range Resources 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.

Range Resources Corp

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Range Resources Corp are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather conflicting basic indicators, Range Resources may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Coterra Energy and Range Resources

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

The idea behind Coterra Energy and Range Resources Corp 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 Transaction History module to view history of all your transactions and understand their impact on performance.