Correlation Between SM Energy and EJF Investments
Can any of the company-specific risk be diversified away by investing in both SM Energy and EJF Investments 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 EJF Investments 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 EJF Investments, you can compare the effects of market volatilities on SM Energy and EJF Investments 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 EJF Investments. Check out your portfolio center. Please also check ongoing floating volatility patterns of SM Energy and EJF Investments.
Diversification Opportunities for SM Energy and EJF Investments
-0.55 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between 0KZA and EJF is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding SM Energy Co and EJF Investments in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EJF Investments 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 EJF Investments. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EJF Investments has no effect on the direction of SM Energy i.e., SM Energy and EJF Investments go up and down completely randomly.
Pair Corralation between SM Energy and EJF Investments
Assuming the 90 days trading horizon SM Energy Co is expected to generate 1.44 times more return on investment than EJF Investments. However, SM Energy is 1.44 times more volatile than EJF Investments. It trades about 0.3 of its potential returns per unit of risk. EJF Investments is currently generating about 0.24 per unit of risk. If you would invest 3,937 in SM Energy Co on October 17, 2024 and sell it today you would earn a total of 433.00 from holding SM Energy Co or generate 11.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 90.48% |
| Values | Daily Returns |
SM Energy Co vs. EJF Investments
Performance |
| Timeline |
| SM Energy |
| EJF Investments |
SM Energy and EJF Investments Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SM Energy and EJF Investments
The main advantage of trading using opposite SM Energy and EJF Investments positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SM Energy position performs unexpectedly, EJF Investments 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 EJF Investments will offset losses from the drop in EJF Investments' long position.| SM Energy vs. Ebro Foods | SM Energy vs. Associated British Foods | SM Energy vs. JB Hunt Transport | SM Energy vs. Grieg Seafood |
| EJF Investments vs. SupplyMe Capital PLC | EJF Investments vs. SM Energy Co | EJF Investments vs. FuelCell Energy | EJF Investments vs. Grand Vision Media |
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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
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