Correlation Between North European and SandRidge Energy
Can any of the company-specific risk be diversified away by investing in both North European and SandRidge 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 North European and SandRidge Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between North European Oil and SandRidge Energy, you can compare the effects of market volatilities on North European and SandRidge 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 North European with a short position of SandRidge Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of North European and SandRidge Energy.
Diversification Opportunities for North European and SandRidge Energy
0.52 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between North and SandRidge is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding North European Oil and SandRidge Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SandRidge Energy and North European 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 North European Oil are associated (or correlated) with SandRidge Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SandRidge Energy has no effect on the direction of North European i.e., North European and SandRidge Energy go up and down completely randomly.
Pair Corralation between North European and SandRidge Energy
Considering the 90-day investment horizon North European Oil is expected to generate 2.43 times more return on investment than SandRidge Energy. However, North European is 2.43 times more volatile than SandRidge Energy. It trades about 0.02 of its potential returns per unit of risk. SandRidge Energy is currently generating about -0.05 per unit of risk. If you would invest 451.00 in North European Oil on November 3, 2024 and sell it today you would earn a total of 1.00 from holding North European Oil or generate 0.22% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
North European Oil vs. SandRidge Energy
Performance |
| Timeline |
| North European Oil |
| SandRidge Energy |
North European and SandRidge Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with North European and SandRidge Energy
The main advantage of trading using opposite North European and SandRidge Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if North European position performs unexpectedly, SandRidge 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 SandRidge Energy will offset losses from the drop in SandRidge Energy's long position.| North European vs. Cross Timbers Royalty | North European vs. VOC Energy Trust | North European vs. Sabine Royalty Trust | North European vs. Permianville Royalty Trust |
| SandRidge Energy vs. Range Resources Corp | SandRidge Energy vs. SM Energy Co | SandRidge Energy vs. Northern Oil Gas |
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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.
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