Correlation Between Western Midstream and Cabot Oil

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

By analyzing existing cross correlation between Western Midstream Partners and Cabot Oil Gas, you can compare the effects of market volatilities on Western Midstream and Cabot Oil 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 Western Midstream with a short position of Cabot Oil. Check out your portfolio center. Please also check ongoing floating volatility patterns of Western Midstream and Cabot Oil.

Diversification Opportunities for Western Midstream and Cabot Oil

0.0

Correlation Coefficient

Western Midstream  Cabot Oil

Pay attention - limited upside

The 3 months correlation between Western and Cabot is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Western Midstream Partners and Cabot Oil Gas in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cabot Oil Gas and Western Midstream 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 Western Midstream Partners are associated (or correlated) with Cabot Oil. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cabot Oil Gas has no effect on the direction of Western Midstream i.e., Western Midstream and Cabot Oil go up and down completely randomly.

Pair Corralation between Western Midstream and Cabot Oil

If you would invest (100.00) in Cabot Oil Gas on January 18, 2024 and sell it today you would earn a total of  100.00  from holding Cabot Oil Gas or generate -100.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

Western Midstream Partners  vs.  Cabot Oil Gas

Western Midstream

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Western Midstream Partners are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak technical and fundamental indicators, Western Midstream unveiled solid returns over the last few months and may actually be approaching a breakup point.

Cabot Oil Gas

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Cabot Oil Gas has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Cabot Oil is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Western Midstream and Cabot Oil

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

The idea behind Western Midstream Partners and Cabot Oil Gas 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.