Correlation Between SM Energy and Gaztransport
Can any of the company-specific risk be diversified away by investing in both SM Energy and Gaztransport 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 SM Energy and Gaztransport into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between SM Energy Co and Gaztransport et Technigaz, you can compare the effects of market volatilities on SM Energy and Gaztransport 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 SM Energy with a short position of Gaztransport. Check out your portfolio center. Please also check ongoing floating volatility patterns of SM Energy and Gaztransport.
Diversification Opportunities for SM Energy and Gaztransport
0.61 | Correlation Coefficient |
Poor diversification
The 3 months correlation between 0KZA and Gaztransport is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding SM Energy Co and Gaztransport et Technigaz in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gaztransport et Technigaz and SM Energy 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 SM Energy Co are associated (or correlated) with Gaztransport. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gaztransport et Technigaz has no effect on the direction of SM Energy i.e., SM Energy and Gaztransport go up and down completely randomly.
Pair Corralation between SM Energy and Gaztransport
Assuming the 90 days trading horizon SM Energy Co is expected to generate 1.86 times more return on investment than Gaztransport. However, SM Energy is 1.86 times more volatile than Gaztransport et Technigaz. It trades about 0.05 of its potential returns per unit of risk. Gaztransport et Technigaz is currently generating about 0.07 per unit of risk. If you would invest 3,880 in SM Energy Co on September 12, 2024 and sell it today you would earn a total of 235.00 from holding SM Energy Co or generate 6.06% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
SM Energy Co vs. Gaztransport et Technigaz
Performance |
| Timeline |
| SM Energy |
| Gaztransport et Technigaz |
SM Energy and Gaztransport Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SM Energy and Gaztransport
The main advantage of trading using opposite SM Energy and Gaztransport positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SM Energy position performs unexpectedly, Gaztransport 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 Gaztransport will offset losses from the drop in Gaztransport's long position.| SM Energy vs. Hong Kong Land | SM Energy vs. Neometals | SM Energy vs. Coor Service Management | SM Energy vs. Fidelity Sustainable USD |
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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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.
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