Correlation Between SM Energy and Blue Star
Can any of the company-specific risk be diversified away by investing in both SM Energy and Blue Star 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 Blue Star 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 Blue Star Capital, you can compare the effects of market volatilities on SM Energy and Blue Star 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 Blue Star. Check out your portfolio center. Please also check ongoing floating volatility patterns of SM Energy and Blue Star.
Diversification Opportunities for SM Energy and Blue Star
Significant diversification
The 3 months correlation between 0KZA and Blue is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding SM Energy Co and Blue Star Capital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Blue Star Capital 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 Blue Star. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Blue Star Capital has no effect on the direction of SM Energy i.e., SM Energy and Blue Star go up and down completely randomly.
Pair Corralation between SM Energy and Blue Star
Assuming the 90 days trading horizon SM Energy is expected to generate 21.58 times less return on investment than Blue Star. But when comparing it to its historical volatility, SM Energy Co is 17.9 times less risky than Blue Star. It trades about 0.04 of its potential returns per unit of risk. Blue Star Capital is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 3,700 in Blue Star Capital on October 28, 2024 and sell it today you would lose (2,725) from holding Blue Star Capital or give up 73.65% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 95.79% |
| Values | Daily Returns |
SM Energy Co vs. Blue Star Capital
Performance |
| Timeline |
| SM Energy |
| Blue Star Capital |
SM Energy and Blue Star Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SM Energy and Blue Star
The main advantage of trading using opposite SM Energy and Blue Star positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SM Energy position performs unexpectedly, Blue Star 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 Blue Star will offset losses from the drop in Blue Star's long position.| SM Energy vs. Arrow Electronics | SM Energy vs. Sparebank 1 SR | SM Energy vs. Lundin Mining Corp | SM Energy vs. Synchrony Financial |
| Blue Star vs. SupplyMe Capital PLC | Blue Star vs. Premier African Minerals | Blue Star vs. SANTANDER UK 8 | Blue Star vs. Tower Resources plc |
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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.
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