Correlation Between SM Energy and Macfarlane Group
Can any of the company-specific risk be diversified away by investing in both SM Energy and Macfarlane Group 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 Macfarlane Group 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 Macfarlane Group PLC, you can compare the effects of market volatilities on SM Energy and Macfarlane Group 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 Macfarlane Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of SM Energy and Macfarlane Group.
Diversification Opportunities for SM Energy and Macfarlane Group
-0.51 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between 0KZA and Macfarlane is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding SM Energy Co and Macfarlane Group PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Macfarlane Group 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 Macfarlane Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Macfarlane Group PLC has no effect on the direction of SM Energy i.e., SM Energy and Macfarlane Group go up and down completely randomly.
Pair Corralation between SM Energy and Macfarlane Group
Assuming the 90 days trading horizon SM Energy Co is expected to generate 1.78 times more return on investment than Macfarlane Group. However, SM Energy is 1.78 times more volatile than Macfarlane Group PLC. It trades about 0.0 of its potential returns per unit of risk. Macfarlane Group PLC is currently generating about -0.06 per unit of risk. If you would invest 4,642 in SM Energy Co on September 3, 2024 and sell it today you would lose (133.00) from holding SM Energy Co or give up 2.87% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 99.22% |
| Values | Daily Returns |
SM Energy Co vs. Macfarlane Group PLC
Performance |
| Timeline |
| SM Energy |
| Macfarlane Group PLC |
SM Energy and Macfarlane Group Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SM Energy and Macfarlane Group
The main advantage of trading using opposite SM Energy and Macfarlane Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SM Energy position performs unexpectedly, Macfarlane Group 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 Macfarlane Group will offset losses from the drop in Macfarlane Group's long position.| SM Energy vs. Gaztransport et Technigaz | SM Energy vs. Schroders Investment Trusts | SM Energy vs. United States Steel | SM Energy vs. Zanaga Iron Ore |
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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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.
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