Correlation Between San Juan and Comstock Resources

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

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

Diversification Opportunities for San Juan and Comstock Resources

0.53

Correlation Coefficient

San Juan  Comstock Resources

Very weak diversification

The 3 months correlation between San and Comstock is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding San Juan Basin and Comstock Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Comstock Resources and San Juan 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 San Juan Basin are associated (or correlated) with Comstock Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Comstock Resources has no effect on the direction of San Juan i.e., San Juan and Comstock Resources go up and down completely randomly.

Pair Corralation between San Juan and Comstock Resources

Considering the 90-day investment horizon San Juan Basin is expected to under-perform the Comstock Resources. In addition to that, San Juan is 1.01 times more volatile than Comstock Resources. It trades about -0.02 of its total potential returns per unit of risk. Comstock Resources is currently generating about 0.08 per unit of volatility. If you would invest  1,551  in Comstock Resources on September 24, 2024 and sell it today you would earn a total of  74.50  from holding Comstock Resources or generate 4.8% return on investment over 90 days.

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

San Juan Basin  vs.  Comstock Resources

San Juan Basin

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days San Juan Basin has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable forward-looking indicators, San Juan is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Comstock Resources

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Comstock Resources are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting basic indicators, Comstock Resources disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with San Juan and Comstock Resources

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

The idea behind San Juan Basin and Comstock Resources 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.