Correlation Between PrimeEnergy and SM Energy
Can any of the company-specific risk be diversified away by investing in both PrimeEnergy 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 PrimeEnergy and SM Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between PrimeEnergy and SM Energy Co, you can compare the effects of market volatilities on PrimeEnergy 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 PrimeEnergy with a short position of SM Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of PrimeEnergy and SM Energy.
Diversification Opportunities for PrimeEnergy and SM Energy
0.39 | Correlation Coefficient |
Weak diversification
The 3 months correlation between PrimeEnergy and SM Energy is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding PrimeEnergy and SM Energy Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SM Energy and PrimeEnergy 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 PrimeEnergy 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 PrimeEnergy i.e., PrimeEnergy and SM Energy go up and down completely randomly.
Pair Corralation between PrimeEnergy and SM Energy
Given the investment horizon of 90 days PrimeEnergy is expected to generate 0.94 times more return on investment than SM Energy. However, PrimeEnergy is 1.07 times less risky than SM Energy. It trades about 0.09 of its potential returns per unit of risk. SM Energy Co is currently generating about 0.03 per unit of risk. If you would invest 7,712 in PrimeEnergy on August 27, 2024 and sell it today you would earn a total of 12,583 from holding PrimeEnergy or generate 163.16% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 99.8% |
| Values | Daily Returns |
PrimeEnergy vs. SM Energy Co
Performance |
| Timeline |
| PrimeEnergy |
| SM Energy |
PrimeEnergy and SM Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with PrimeEnergy and SM Energy
The main advantage of trading using opposite PrimeEnergy and SM Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PrimeEnergy 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.| PrimeEnergy vs. Epsilon Energy | PrimeEnergy vs. Crescent Energy Co | PrimeEnergy vs. Evolution Petroleum | PrimeEnergy vs. MorningStar Partners, LP |
| 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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.
Other Complementary Tools
| Investing Opportunities Build portfolios using our predefined set of ideas and optimize them against your investing preferences | |
| Portfolio Holdings Check your current holdings and cash postion to detemine if your portfolio needs rebalancing | |
| Portfolio File Import Quickly import all of your third-party portfolios from your local drive in csv format | |
| Equity Valuation Check real value of public entities based on technical and fundamental data | |
| Latest Portfolios Quick portfolio dashboard that showcases your latest portfolios |