Correlation Between Coterra Energy and Santos

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

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

Diversification Opportunities for Coterra Energy and Santos

-0.52

Correlation Coefficient

Coterra Energy  Santos

Excellent diversification

The 3 months correlation between Coterra and Santos is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding Coterra Energy and Santos in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Santos and Coterra 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 Coterra Energy are associated (or correlated) with Santos. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Santos has no effect on the direction of Coterra Energy i.e., Coterra Energy and Santos go up and down completely randomly.

Pair Corralation between Coterra Energy and Santos

Given the investment horizon of 90 days Coterra Energy is expected to under-perform the Santos. But the stock apears to be less risky and, when comparing its historical volatility, Coterra Energy is 4.01 times less risky than Santos. The stock trades about -0.1 of its potential returns per unit of risk. The Santos is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest  445.00  in Santos on September 17, 2024 and sell it today you would lose (25.00) from holding Santos or give up 5.62% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Coterra Energy  vs.  Santos

Coterra Energy

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Coterra Energy are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unfluctuating basic indicators, Coterra Energy may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Santos

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Santos has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Coterra Energy and Santos

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

The idea behind Coterra Energy and Santos 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 Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .