Correlation Between SM Energy and Tetragon Financial
Can any of the company-specific risk be diversified away by investing in both SM Energy and Tetragon Financial 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 Tetragon Financial 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 Tetragon Financial Group, you can compare the effects of market volatilities on SM Energy and Tetragon Financial 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 Tetragon Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of SM Energy and Tetragon Financial.
Diversification Opportunities for SM Energy and Tetragon Financial
-0.16 | Correlation Coefficient |
Good diversification
The 3 months correlation between 0KZA and Tetragon is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding SM Energy Co and Tetragon Financial Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tetragon Financial 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 Tetragon Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tetragon Financial has no effect on the direction of SM Energy i.e., SM Energy and Tetragon Financial go up and down completely randomly.
Pair Corralation between SM Energy and Tetragon Financial
Assuming the 90 days trading horizon SM Energy is expected to generate 1.52 times less return on investment than Tetragon Financial. But when comparing it to its historical volatility, SM Energy Co is 1.18 times less risky than Tetragon Financial. It trades about 0.35 of its potential returns per unit of risk. Tetragon Financial Group is currently generating about 0.45 of returns per unit of risk over similar time horizon. If you would invest 1,410 in Tetragon Financial Group on October 25, 2024 and sell it today you would earn a total of 240.00 from holding Tetragon Financial Group or generate 17.02% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 95.0% |
| Values | Daily Returns |
SM Energy Co vs. Tetragon Financial Group
Performance |
| Timeline |
| SM Energy |
| Tetragon Financial |
SM Energy and Tetragon Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SM Energy and Tetragon Financial
The main advantage of trading using opposite SM Energy and Tetragon Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SM Energy position performs unexpectedly, Tetragon Financial 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 Tetragon Financial will offset losses from the drop in Tetragon Financial's long position.| SM Energy vs. Alien Metals | SM Energy vs. Bankers Investment Trust | SM Energy vs. New Residential Investment | SM Energy vs. Europa Metals |
| Tetragon Financial vs. Griffin Mining | Tetragon Financial vs. Pan American Silver | Tetragon Financial vs. Summit Materials Cl | Tetragon Financial vs. Atalaya Mining |
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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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