Correlation Between SM Energy and Gamma Communications
Can any of the company-specific risk be diversified away by investing in both SM Energy and Gamma Communications 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 Gamma Communications 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 Gamma Communications PLC, you can compare the effects of market volatilities on SM Energy and Gamma Communications 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 Gamma Communications. Check out your portfolio center. Please also check ongoing floating volatility patterns of SM Energy and Gamma Communications.
Diversification Opportunities for SM Energy and Gamma Communications
0.07 | Correlation Coefficient |
Significant diversification
The 3 months correlation between 0KZA and Gamma is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding SM Energy Co and Gamma Communications PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gamma Communications PLC 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 Gamma Communications. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gamma Communications PLC has no effect on the direction of SM Energy i.e., SM Energy and Gamma Communications go up and down completely randomly.
Pair Corralation between SM Energy and Gamma Communications
Assuming the 90 days trading horizon SM Energy Co is expected to generate 1.25 times more return on investment than Gamma Communications. However, SM Energy is 1.25 times more volatile than Gamma Communications PLC. It trades about -0.02 of its potential returns per unit of risk. Gamma Communications PLC is currently generating about -0.05 per unit of risk. If you would invest 4,274 in SM Energy Co on November 2, 2024 and sell it today you would lose (302.00) from holding SM Energy Co or give up 7.07% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 99.06% |
| Values | Daily Returns |
SM Energy Co vs. Gamma Communications PLC
Performance |
| Timeline |
| SM Energy |
| Gamma Communications PLC |
SM Energy and Gamma Communications Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SM Energy and Gamma Communications
The main advantage of trading using opposite SM Energy and Gamma Communications positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SM Energy position performs unexpectedly, Gamma Communications 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 Gamma Communications will offset losses from the drop in Gamma Communications' long position.| SM Energy vs. Omega Healthcare Investors | SM Energy vs. JB Hunt Transport | SM Energy vs. Zegona Communications Plc | SM Energy vs. Gaztransport et Technigaz |
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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.
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