Correlation Between Earthstone Energy and SM Energy
Can any of the company-specific risk be diversified away by investing in both Earthstone Energy 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 Earthstone Energy and SM Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Earthstone Energy and SM Energy Co, you can compare the effects of market volatilities on Earthstone Energy 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 Earthstone Energy with a short position of SM Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Earthstone Energy and SM Energy.
Diversification Opportunities for Earthstone Energy and SM Energy
0.34 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Earthstone and SM Energy is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding Earthstone Energy and SM Energy Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SM Energy and Earthstone 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 Earthstone Energy 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 Earthstone Energy i.e., Earthstone Energy and SM Energy go up and down completely randomly.
Pair Corralation between Earthstone Energy and SM Energy
Given the investment horizon of 90 days Earthstone Energy is expected to generate 1.1 times more return on investment than SM Energy. However, Earthstone Energy is 1.1 times more volatile than SM Energy Co. It trades about 0.22 of its potential returns per unit of risk. SM Energy Co is currently generating about 0.06 per unit of risk. If you would invest 1,413 in Earthstone Energy on August 28, 2024 and sell it today you would earn a total of 119.00 from holding Earthstone Energy or generate 8.42% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 4.24% |
| Values | Daily Returns |
Earthstone Energy vs. SM Energy Co
Performance |
| Timeline |
| Earthstone Energy |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
| SM Energy |
Earthstone Energy and SM Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Earthstone Energy and SM Energy
The main advantage of trading using opposite Earthstone Energy and SM Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Earthstone Energy 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.| Earthstone Energy vs. Vital Energy | Earthstone Energy vs. Comstock Resources | Earthstone Energy vs. Magnolia Oil Gas | Earthstone Energy vs. Obsidian Energy |
| SM Energy vs. ConocoPhillips | SM Energy vs. Occidental Petroleum | SM Energy vs. EOG Resources | SM Energy vs. Coterra 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
Other Complementary Tools
| Financial Widgets Easily integrated Macroaxis content with over 30 different plug-and-play financial widgets | |
| Performance Analysis Check effects of mean-variance optimization against your current asset allocation | |
| Fundamentals Comparison Compare fundamentals across multiple equities to find investing opportunities | |
| Price Transformation Use Price Transformation models to analyze the depth of different equity instruments across global markets | |
| Idea Optimizer Use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio |