Correlation Between SM Energy and MG Credit
Can any of the company-specific risk be diversified away by investing in both SM Energy and MG Credit 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 MG Credit 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 MG Credit Income, you can compare the effects of market volatilities on SM Energy and MG Credit 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 MG Credit. Check out your portfolio center. Please also check ongoing floating volatility patterns of SM Energy and MG Credit.
Diversification Opportunities for SM Energy and MG Credit
Good diversification
The 3 months correlation between 0KZA and MGCI is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding SM Energy Co and MG Credit Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MG Credit Income 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 MG Credit. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MG Credit Income has no effect on the direction of SM Energy i.e., SM Energy and MG Credit go up and down completely randomly.
Pair Corralation between SM Energy and MG Credit
Assuming the 90 days trading horizon SM Energy is expected to generate 3.81 times less return on investment than MG Credit. In addition to that, SM Energy is 2.29 times more volatile than MG Credit Income. It trades about 0.0 of its total potential returns per unit of risk. MG Credit Income is currently generating about 0.03 per unit of volatility. If you would invest 9,136 in MG Credit Income on October 13, 2024 and sell it today you would earn a total of 364.00 from holding MG Credit Income or generate 3.98% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 98.65% |
| Values | Daily Returns |
SM Energy Co vs. MG Credit Income
Performance |
| Timeline |
| SM Energy |
| MG Credit Income |
SM Energy and MG Credit Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SM Energy and MG Credit
The main advantage of trading using opposite SM Energy and MG Credit positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SM Energy position performs unexpectedly, MG Credit 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 MG Credit will offset losses from the drop in MG Credit's long position.| SM Energy vs. MTI Wireless Edge | SM Energy vs. Prosiebensat 1 Media | SM Energy vs. XLMedia PLC | SM Energy vs. One Media iP |
| MG Credit vs. SupplyMe Capital PLC | MG Credit vs. SM Energy Co | MG Credit vs. FuelCell Energy | MG Credit 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
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