Correlation Between XXL Energy and Crescent Energy

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

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

Diversification Opportunities for XXL Energy and Crescent Energy

-0.12

Correlation Coefficient

XXL Energy  Crescent Energy

Good diversification

The 3 months correlation between XXL and Crescent is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding XXL Energy Corp and Crescent Energy Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Crescent Energy and XXL 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 XXL Energy Corp are associated (or correlated) with Crescent Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Crescent Energy has no effect on the direction of XXL Energy i.e., XXL Energy and Crescent Energy go up and down completely randomly.

Pair Corralation between XXL Energy and Crescent Energy

Assuming the 90 days horizon XXL Energy Corp is expected to under-perform the Crescent Energy. In addition to that, XXL Energy is 4.79 times more volatile than Crescent Energy Co. It trades about -0.13 of its total potential returns per unit of risk. Crescent Energy Co is currently generating about 0.19 per unit of volatility. If you would invest  1,105  in Crescent Energy Co on September 4, 2024 and sell it today you would earn a total of  378.00  from holding Crescent Energy Co or generate 34.21% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

XXL Energy Corp  vs.  Crescent Energy Co

XXL Energy Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days XXL Energy Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's technical and fundamental indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Crescent Energy

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Crescent Energy Co are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal technical and fundamental indicators, Crescent Energy showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with XXL Energy and Crescent Energy

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

The idea behind XXL Energy Corp and Crescent Energy Co 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.