Correlation Between Range Resources and Hess

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

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

Diversification Opportunities for Range Resources and Hess

0.82

Correlation Coefficient

Range Resources  Hess

Very poor diversification

The 3 months correlation between Range and Hess is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Range Resources Corp and Hess Corp. in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hess and Range 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 Range Resources Corp are associated (or correlated) with Hess. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hess has no effect on the direction of Range Resources i.e., Range Resources and Hess go up and down completely randomly.

Pair Corralation between Range Resources and Hess

Considering the 90-day investment horizon Range Resources is expected to generate 1.34 times less return on investment than Hess. In addition to that, Range Resources is 1.61 times more volatile than Hess Corporation. It trades about 0.11 of its total potential returns per unit of risk. Hess Corporation is currently generating about 0.24 per unit of volatility. If you would invest  13,025  in Hess Corporation on December 26, 2024 and sell it today you would earn a total of  3,027  from holding Hess Corporation or generate 23.24% return on investment over 90 days.

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

Range Resources Corp  vs.  Hess Corp.

Range Resources Corp

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Range Resources Corp are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of rather conflicting basic indicators, Range Resources exhibited solid returns over the last few months and may actually be approaching a breakup point.

Hess

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Hess Corporation are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile technical and fundamental indicators, Hess unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Range Resources and Hess

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

The idea behind Range Resources Corp and Hess Corporation 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.