Correlation Between EQT and California Resources

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

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

Diversification Opportunities for EQT and California Resources

0.94

Correlation Coefficient

EQT  California Resources

Almost no diversification

The 3 months correlation between EQT and California is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding EQT Corp. and California Resources Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on California Resources Corp and EQT 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 EQT Corporation are associated (or correlated) with California Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of California Resources Corp has no effect on the direction of EQT i.e., EQT and California Resources go up and down completely randomly.

Pair Corralation between EQT and California Resources

Considering the 90-day investment horizon EQT Corporation is expected to generate 1.05 times more return on investment than California Resources. However, EQT is 1.05 times more volatile than California Resources Corp. It trades about 0.24 of its potential returns per unit of risk. California Resources Corp is currently generating about 0.13 per unit of risk. If you would invest  3,268  in EQT Corporation on September 5, 2024 and sell it today you would earn a total of  1,213  from holding EQT Corporation or generate 37.12% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	98.44%
Values	Daily Returns

EQT Corp.  vs.  California Resources Corp

EQT Corporation

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in EQT Corporation are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating basic indicators, EQT unveiled solid returns over the last few months and may actually be approaching a breakup point.

California Resources Corp

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in California Resources Corp are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating basic indicators, California Resources exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with EQT and California Resources

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

The idea behind EQT Corporation and California Resources Corp 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.