Correlation Between Cummins and Antero Resources
Can any of the company-specific risk be diversified away by investing in both Cummins and Antero 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 Cummins and Antero Resources into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Cummins and Antero Resources Corp, you can compare the effects of market volatilities on Cummins and Antero 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 Cummins with a short position of Antero Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cummins and Antero Resources.
Diversification Opportunities for Cummins and Antero Resources
0.81 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Cummins and Antero is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Cummins and Antero Resources Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Antero Resources Corp and Cummins 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 Cummins are associated (or correlated) with Antero Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Antero Resources Corp has no effect on the direction of Cummins i.e., Cummins and Antero Resources go up and down completely randomly.
Pair Corralation between Cummins and Antero Resources
Considering the 90-day investment horizon Cummins is expected to generate 61.8 times less return on investment than Antero Resources. But when comparing it to its historical volatility, Cummins is 2.23 times less risky than Antero Resources. It trades about 0.01 of its potential returns per unit of risk. Antero Resources Corp is currently generating about 0.39 of returns per unit of risk over similar time horizon. If you would invest 2,732 in Antero Resources Corp on January 26, 2024 and sell it today you would earn a total of 412.00 from holding Antero Resources Corp or generate 15.08% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 95.45% |
| Values | Daily Returns |
Cummins vs. Antero Resources Corp
Performance |
| Timeline |
| Cummins |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Solid
| Antero Resources Corp |
Cummins and Antero Resources Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cummins and Antero Resources
The main advantage of trading using opposite Cummins and Antero Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cummins position performs unexpectedly, Antero 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 Antero Resources will offset losses from the drop in Antero Resources' long position.The idea behind Cummins and Antero 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.| Antero Resources vs. Southwestern Energy | Antero Resources vs. Chesapeake Energy Corp | Antero Resources vs. EQT Corporation | Antero Resources vs. Matador Resources |
Check out your portfolio center.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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.
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