Correlation Between SandRidge Energy and Epsilon Energy
Can any of the company-specific risk be diversified away by investing in both SandRidge Energy and Epsilon 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 SandRidge Energy and Epsilon Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between SandRidge Energy and Epsilon Energy, you can compare the effects of market volatilities on SandRidge Energy and Epsilon 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 SandRidge Energy with a short position of Epsilon Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of SandRidge Energy and Epsilon Energy.
Diversification Opportunities for SandRidge Energy and Epsilon Energy
-0.34 | Correlation Coefficient |
Very good diversification
The 3 months correlation between SandRidge and Epsilon is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding SandRidge Energy and Epsilon Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Epsilon Energy and SandRidge 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 SandRidge Energy are associated (or correlated) with Epsilon Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Epsilon Energy has no effect on the direction of SandRidge Energy i.e., SandRidge Energy and Epsilon Energy go up and down completely randomly.
Pair Corralation between SandRidge Energy and Epsilon Energy
Allowing for the 90-day total investment horizon SandRidge Energy is expected to under-perform the Epsilon Energy. But the stock apears to be less risky and, when comparing its historical volatility, SandRidge Energy is 1.08 times less risky than Epsilon Energy. The stock trades about -0.05 of its potential returns per unit of risk. The Epsilon Energy is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 530.00 in Epsilon Energy on August 24, 2024 and sell it today you would earn a total of 72.00 from holding Epsilon Energy or generate 13.58% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
SandRidge Energy vs. Epsilon Energy
Performance |
| Timeline |
| SandRidge Energy |
| Epsilon Energy |
SandRidge Energy and Epsilon Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SandRidge Energy and Epsilon Energy
The main advantage of trading using opposite SandRidge Energy and Epsilon Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SandRidge Energy position performs unexpectedly, Epsilon 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 Epsilon Energy will offset losses from the drop in Epsilon Energy's long position.| SandRidge Energy vs. Range Resources Corp | SandRidge Energy vs. SM Energy Co | SandRidge Energy vs. Northern Oil Gas |
| Epsilon Energy vs. Vaalco Energy | Epsilon Energy vs. PHX Minerals | Epsilon Energy vs. Northern Oil Gas | Epsilon Energy vs. Granite Ridge Resources |
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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.
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