Correlation Between EOG Resources and Comstock Resources

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

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

Diversification Opportunities for EOG Resources and Comstock Resources

0.75

Correlation Coefficient

EOG Resources  Comstock Resources

Poor diversification

The 3 months correlation between EOG and Comstock is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding EOG Resources and Comstock Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Comstock Resources and EOG Resources 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 EOG Resources are associated (or correlated) with Comstock Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Comstock Resources has no effect on the direction of EOG Resources i.e., EOG Resources and Comstock Resources go up and down completely randomly.

Pair Corralation between EOG Resources and Comstock Resources

Considering the 90-day investment horizon EOG Resources is expected to generate 2.31 times less return on investment than Comstock Resources. But when comparing it to its historical volatility, EOG Resources is 2.42 times less risky than Comstock Resources. It trades about 0.09 of its potential returns per unit of risk. Comstock Resources is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  1,709  in Comstock Resources on December 27, 2024 and sell it today you would earn a total of  283.00  from holding Comstock Resources or generate 16.56% return on investment over 90 days.

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

EOG Resources  vs.  Comstock Resources

EOG Resources

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in EOG Resources are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, EOG Resources may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Comstock Resources

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Comstock Resources are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite quite unsteady basic indicators, Comstock Resources disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with EOG Resources and Comstock Resources

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

The idea behind EOG Resources and Comstock Resources 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.