Correlation Between SM Energy and Sabre Insurance
Can any of the company-specific risk be diversified away by investing in both SM Energy and Sabre Insurance 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 Sabre Insurance 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 Sabre Insurance Group, you can compare the effects of market volatilities on SM Energy and Sabre Insurance 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 Sabre Insurance. Check out your portfolio center. Please also check ongoing floating volatility patterns of SM Energy and Sabre Insurance.
Diversification Opportunities for SM Energy and Sabre Insurance
-0.2 | Correlation Coefficient |
Good diversification
The 3 months correlation between 0KZA and Sabre is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding SM Energy Co and Sabre Insurance Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sabre Insurance Group 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 Sabre Insurance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sabre Insurance Group has no effect on the direction of SM Energy i.e., SM Energy and Sabre Insurance go up and down completely randomly.
Pair Corralation between SM Energy and Sabre Insurance
Assuming the 90 days trading horizon SM Energy Co is expected to generate 1.49 times more return on investment than Sabre Insurance. However, SM Energy is 1.49 times more volatile than Sabre Insurance Group. It trades about 0.04 of its potential returns per unit of risk. Sabre Insurance Group is currently generating about 0.04 per unit of risk. If you would invest 3,357 in SM Energy Co on August 30, 2024 and sell it today you would earn a total of 1,133 from holding SM Energy Co or generate 33.75% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 93.16% |
| Values | Daily Returns |
SM Energy Co vs. Sabre Insurance Group
Performance |
| Timeline |
| SM Energy |
| Sabre Insurance Group |
SM Energy and Sabre Insurance Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SM Energy and Sabre Insurance
The main advantage of trading using opposite SM Energy and Sabre Insurance positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SM Energy position performs unexpectedly, Sabre Insurance 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 Sabre Insurance will offset losses from the drop in Sabre Insurance'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 |
| Sabre Insurance vs. Toyota Motor Corp | Sabre Insurance vs. Neometals | Sabre Insurance vs. Coor Service Management | Sabre Insurance vs. JPMorgan ETFs ICAV |
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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.
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