Correlation Between SM Energy and Reckitt Benckiser
Can any of the company-specific risk be diversified away by investing in both SM Energy and Reckitt Benckiser 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 Reckitt Benckiser 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 Reckitt Benckiser Group, you can compare the effects of market volatilities on SM Energy and Reckitt Benckiser 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 Reckitt Benckiser. Check out your portfolio center. Please also check ongoing floating volatility patterns of SM Energy and Reckitt Benckiser.
Diversification Opportunities for SM Energy and Reckitt Benckiser
0.33 | Correlation Coefficient |
Weak diversification
The 3 months correlation between 0KZA and Reckitt is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding SM Energy Co and Reckitt Benckiser Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Reckitt Benckiser 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 Reckitt Benckiser. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Reckitt Benckiser has no effect on the direction of SM Energy i.e., SM Energy and Reckitt Benckiser go up and down completely randomly.
Pair Corralation between SM Energy and Reckitt Benckiser
Assuming the 90 days trading horizon SM Energy Co is expected to under-perform the Reckitt Benckiser. In addition to that, SM Energy is 2.37 times more volatile than Reckitt Benckiser Group. It trades about -0.13 of its total potential returns per unit of risk. Reckitt Benckiser Group is currently generating about 0.05 per unit of volatility. If you would invest 478,900 in Reckitt Benckiser Group on September 12, 2024 and sell it today you would earn a total of 4,600 from holding Reckitt Benckiser Group or generate 0.96% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
SM Energy Co vs. Reckitt Benckiser Group
Performance |
| Timeline |
| SM Energy |
| Reckitt Benckiser |
SM Energy and Reckitt Benckiser Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SM Energy and Reckitt Benckiser
The main advantage of trading using opposite SM Energy and Reckitt Benckiser positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SM Energy position performs unexpectedly, Reckitt Benckiser 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 Reckitt Benckiser will offset losses from the drop in Reckitt Benckiser's long position.| SM Energy vs. Hong Kong Land | SM Energy vs. Neometals | SM Energy vs. Coor Service Management | SM Energy vs. Fidelity Sustainable USD |
| Reckitt Benckiser vs. Fortune Brands Home | Reckitt Benckiser vs. Neometals | Reckitt Benckiser vs. McEwen Mining | Reckitt Benckiser vs. Zurich Insurance Group |
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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
Other Complementary Tools
| Portfolio Volatility Check portfolio volatility and analyze historical return density to properly model market risk | |
| Competition Analyzer Analyze and compare many basic indicators for a group of related or unrelated entities | |
| Commodity Channel Use Commodity Channel Index to analyze current equity momentum | |
| Money Managers Screen money managers from public funds and ETFs managed around the world | |
| Latest Portfolios Quick portfolio dashboard that showcases your latest portfolios |