Correlation Between PermRock Royalty and Coterra Energy

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

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

Diversification Opportunities for PermRock Royalty and Coterra Energy

0.62

Correlation Coefficient

PermRock Royalty  Coterra Energy

Poor diversification

The 3 months correlation between PermRock and Coterra is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding PermRock Royalty Trust and Coterra Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Coterra Energy and PermRock Royalty 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 PermRock Royalty Trust 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 PermRock Royalty i.e., PermRock Royalty and Coterra Energy go up and down completely randomly.

Pair Corralation between PermRock Royalty and Coterra Energy

Considering the 90-day investment horizon PermRock Royalty Trust is expected to generate 1.16 times more return on investment than Coterra Energy. However, PermRock Royalty is 1.16 times more volatile than Coterra Energy. It trades about 0.18 of its potential returns per unit of risk. Coterra Energy is currently generating about 0.12 per unit of risk. If you would invest  350.00  in PermRock Royalty Trust on December 29, 2024 and sell it today you would earn a total of  81.00  from holding PermRock Royalty Trust or generate 23.14% return on investment over 90 days.

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

PermRock Royalty Trust  vs.  Coterra Energy

PermRock Royalty Trust

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in PermRock Royalty Trust are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, PermRock Royalty unveiled solid returns over the last few months and may actually be approaching a breakup point.

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 unsteady basic indicators, Coterra Energy sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with PermRock Royalty and Coterra Energy

The main advantage of trading using opposite PermRock Royalty and Coterra Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PermRock Royalty 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 PermRock Royalty Trust 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.