Correlation Between Civitas Resources and SM Energy
Can any of the company-specific risk be diversified away by investing in both Civitas Resources and SM Energy 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 Civitas Resources and SM Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Civitas Resources and SM Energy Co, you can compare the effects of market volatilities on Civitas Resources and SM Energy 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 Civitas Resources with a short position of SM Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Civitas Resources and SM Energy.
Diversification Opportunities for Civitas Resources and SM Energy
0.79 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Civitas and SM Energy is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Civitas Resources and SM Energy Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SM Energy and Civitas Resources 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 Civitas Resources are associated (or correlated) with SM Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SM Energy has no effect on the direction of Civitas Resources i.e., Civitas Resources and SM Energy go up and down completely randomly.
Pair Corralation between Civitas Resources and SM Energy
Given the investment horizon of 90 days Civitas Resources is expected to under-perform the SM Energy. But the stock apears to be less risky and, when comparing its historical volatility, Civitas Resources is 1.18 times less risky than SM Energy. The stock trades about -0.02 of its potential returns per unit of risk. The SM Energy Co is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest 3,635 in SM Energy Co on November 4, 2024 and sell it today you would earn a total of 161.00 from holding SM Energy Co or generate 4.43% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Civitas Resources vs. SM Energy Co
Performance |
| Timeline |
| Civitas Resources |
| SM Energy |
Civitas Resources and SM Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Civitas Resources and SM Energy
The main advantage of trading using opposite Civitas Resources and SM Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Civitas Resources position performs unexpectedly, SM Energy 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 SM Energy will offset losses from the drop in SM Energy's long position.| Civitas Resources vs. Magnolia Oil Gas | Civitas Resources vs. SM Energy Co | Civitas Resources vs. Range Resources Corp | Civitas Resources vs. Matador Resources |
| SM Energy vs. Vital Energy | SM Energy vs. Permian Resources | SM Energy vs. Matador Resources | SM Energy vs. Obsidian Energy |
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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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