Correlation Between Coterra Energy and Sky Petroleum

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

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

Diversification Opportunities for Coterra Energy and Sky Petroleum

-0.29

Correlation Coefficient

Coterra Energy  Sky Petroleum

Very good diversification

The 3 months correlation between Coterra and Sky is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding Coterra Energy and Sky Petroleum in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sky Petroleum 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 Sky Petroleum. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sky Petroleum has no effect on the direction of Coterra Energy i.e., Coterra Energy and Sky Petroleum go up and down completely randomly.

Pair Corralation between Coterra Energy and Sky Petroleum

If you would invest  2,406  in Coterra Energy on October 22, 2024 and sell it today you would earn a total of  541.00  from holding Coterra Energy or generate 22.49% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.0%
Values	Daily Returns

Coterra Energy  vs.  Sky Petroleum

Coterra Energy

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Coterra Energy are ranked lower than 17 (%) 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.

Sky Petroleum

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Sky Petroleum are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite fairly fragile basic indicators, Sky Petroleum demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Coterra Energy and Sky Petroleum

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

The idea behind Coterra Energy and Sky Petroleum 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.