Correlation Between SM Energy and Impax Environmental
Can any of the company-specific risk be diversified away by investing in both SM Energy and Impax Environmental 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 Impax Environmental 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 Impax Environmental Markets, you can compare the effects of market volatilities on SM Energy and Impax Environmental 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 Impax Environmental. Check out your portfolio center. Please also check ongoing floating volatility patterns of SM Energy and Impax Environmental.
Diversification Opportunities for SM Energy and Impax Environmental
0.26 | Correlation Coefficient |
Modest diversification
The 3 months correlation between 0KZA and Impax is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding SM Energy Co and Impax Environmental Markets in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Impax Environmental 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 Impax Environmental. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Impax Environmental has no effect on the direction of SM Energy i.e., SM Energy and Impax Environmental go up and down completely randomly.
Pair Corralation between SM Energy and Impax Environmental
Assuming the 90 days trading horizon SM Energy Co is expected to generate 1.94 times more return on investment than Impax Environmental. However, SM Energy is 1.94 times more volatile than Impax Environmental Markets. It trades about 0.38 of its potential returns per unit of risk. Impax Environmental Markets is currently generating about 0.56 per unit of risk. If you would invest 3,707 in SM Energy Co on October 24, 2024 and sell it today you would earn a total of 488.00 from holding SM Energy Co or generate 13.16% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 95.24% |
| Values | Daily Returns |
SM Energy Co vs. Impax Environmental Markets
Performance |
| Timeline |
| SM Energy |
| Impax Environmental |
SM Energy and Impax Environmental Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SM Energy and Impax Environmental
The main advantage of trading using opposite SM Energy and Impax Environmental positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SM Energy position performs unexpectedly, Impax Environmental 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 Impax Environmental will offset losses from the drop in Impax Environmental's long position.| SM Energy vs. Alien Metals | SM Energy vs. Bankers Investment Trust | SM Energy vs. New Residential Investment | SM Energy vs. Europa Metals |
| Impax Environmental vs. Teradata Corp | Impax Environmental vs. Fidelity National Information | Impax Environmental vs. Ion Beam Applications | Impax Environmental vs. Infrastrutture Wireless Italiane |
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 Equity Valuation module to check real value of public entities based on technical and fundamental data.
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