Correlation Between Pioneer Natural and Callon Petroleum

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

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

Diversification Opportunities for Pioneer Natural and Callon Petroleum

0.51

Correlation Coefficient

Pioneer Natural  Callon Petroleum

Very weak diversification

The 3 months correlation between Pioneer and Callon is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding Pioneer Natural Resources and Callon Petroleum in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Callon Petroleum and Pioneer Natural 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 Pioneer Natural Resources are associated (or correlated) with Callon Petroleum. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Callon Petroleum has no effect on the direction of Pioneer Natural i.e., Pioneer Natural and Callon Petroleum go up and down completely randomly.

Pair Corralation between Pioneer Natural and Callon Petroleum

Considering the 90-day investment horizon Pioneer Natural is expected to generate 1.23 times less return on investment than Callon Petroleum. But when comparing it to its historical volatility, Pioneer Natural Resources is 1.62 times less risky than Callon Petroleum. It trades about 0.02 of its potential returns per unit of risk. Callon Petroleum is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  3,530  in Callon Petroleum on September 2, 2024 and sell it today you would earn a total of  23.00  from holding Callon Petroleum or generate 0.65% return on investment over 90 days.

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

Pioneer Natural Resources  vs.  Callon Petroleum

Pioneer Natural Resources

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Pioneer Natural Resources has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Pioneer Natural is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Callon Petroleum

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Callon Petroleum has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Callon Petroleum is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Pioneer Natural and Callon Petroleum

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

The idea behind Pioneer Natural Resources and Callon Petroleum 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.