Correlation Between Eco (Atlantic) and Coterra Energy

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

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

Diversification Opportunities for Eco (Atlantic) and Coterra Energy

-0.27

Correlation Coefficient

Eco (Atlantic)  Coterra Energy

Very good diversification

The 3 months correlation between Eco and Coterra is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding Eco Oil Gas and Coterra Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Coterra Energy and Eco (Atlantic) 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 Eco Oil Gas are associated (or correlated) with Coterra Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Coterra Energy has no effect on the direction of Eco (Atlantic) i.e., Eco (Atlantic) and Coterra Energy go up and down completely randomly.

Pair Corralation between Eco (Atlantic) and Coterra Energy

Assuming the 90 days horizon Eco (Atlantic) is expected to generate 5.4 times less return on investment than Coterra Energy. In addition to that, Eco (Atlantic) is 4.68 times more volatile than Coterra Energy. It trades about 0.01 of its total potential returns per unit of risk. Coterra Energy is currently generating about 0.15 per unit of volatility. If you would invest  2,444  in Coterra Energy on December 27, 2024 and sell it today you would earn a total of  408.00  from holding Coterra Energy or generate 16.69% return on investment over 90 days.

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

Eco Oil Gas  vs.  Coterra Energy

Eco (Atlantic)

Risk-Adjusted Performance

Very Weak

Over the last 90 days Eco Oil Gas has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Eco (Atlantic) is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Coterra Energy

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Coterra Energy are ranked lower than 11 (%) 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.

Pair Trading with Eco (Atlantic) and Coterra Energy

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

The idea behind Eco Oil Gas and Coterra Energy 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.