Correlation Between SM Energy and LBG Media
Can any of the company-specific risk be diversified away by investing in both SM Energy and LBG Media 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 LBG Media 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 LBG Media PLC, you can compare the effects of market volatilities on SM Energy and LBG Media 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 LBG Media. Check out your portfolio center. Please also check ongoing floating volatility patterns of SM Energy and LBG Media.
Diversification Opportunities for SM Energy and LBG Media
Excellent diversification
The 3 months correlation between 0KZA and LBG is -0.61. Overlapping area represents the amount of risk that can be diversified away by holding SM Energy Co and LBG Media PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LBG Media 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 LBG Media. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LBG Media PLC has no effect on the direction of SM Energy i.e., SM Energy and LBG Media go up and down completely randomly.
Pair Corralation between SM Energy and LBG Media
Assuming the 90 days trading horizon SM Energy is expected to generate 1.69 times less return on investment than LBG Media. But when comparing it to its historical volatility, SM Energy Co is 1.04 times less risky than LBG Media. It trades about 0.04 of its potential returns per unit of risk. LBG Media PLC is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 6,700 in LBG Media PLC on August 30, 2024 and sell it today you would earn a total of 6,000 from holding LBG Media PLC or generate 89.55% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 93.16% |
| Values | Daily Returns |
SM Energy Co vs. LBG Media PLC
Performance |
| Timeline |
| SM Energy |
| LBG Media PLC |
SM Energy and LBG Media Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SM Energy and LBG Media
The main advantage of trading using opposite SM Energy and LBG Media positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SM Energy position performs unexpectedly, LBG Media 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 LBG Media will offset losses from the drop in LBG Media's long position.| SM Energy vs. Naturhouse Health SA | SM Energy vs. Induction Healthcare Group | SM Energy vs. Omega Healthcare Investors | SM Energy vs. Gaming Realms plc |
| LBG Media vs. Walmart | LBG Media vs. BYD Co | LBG Media vs. Volkswagen AG | LBG Media vs. Volkswagen AG Non Vtg |
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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.
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