Correlation Between SandRidge Energy and Diamondback Energy
Can any of the company-specific risk be diversified away by investing in both SandRidge Energy and Diamondback 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 Diamondback 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 Diamondback Energy, you can compare the effects of market volatilities on SandRidge Energy and Diamondback 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 Diamondback Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of SandRidge Energy and Diamondback Energy.
Diversification Opportunities for SandRidge Energy and Diamondback Energy
0.56 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between SandRidge and Diamondback is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding SandRidge Energy and Diamondback Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Diamondback 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 Diamondback Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Diamondback Energy has no effect on the direction of SandRidge Energy i.e., SandRidge Energy and Diamondback Energy go up and down completely randomly.
Pair Corralation between SandRidge Energy and Diamondback Energy
Allowing for the 90-day total investment horizon SandRidge Energy is expected to generate 0.88 times more return on investment than Diamondback Energy. However, SandRidge Energy is 1.14 times less risky than Diamondback Energy. It trades about -0.03 of its potential returns per unit of risk. Diamondback Energy is currently generating about -0.14 per unit of risk. If you would invest 1,194 in SandRidge Energy on November 4, 2024 and sell it today you would lose (9.00) from holding SandRidge Energy or give up 0.75% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
SandRidge Energy vs. Diamondback Energy
Performance |
| Timeline |
| SandRidge Energy |
| Diamondback Energy |
SandRidge Energy and Diamondback Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SandRidge Energy and Diamondback Energy
The main advantage of trading using opposite SandRidge Energy and Diamondback Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SandRidge Energy position performs unexpectedly, Diamondback 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 Diamondback Energy will offset losses from the drop in Diamondback Energy's long position.| SandRidge Energy vs. Range Resources Corp | SandRidge Energy vs. SM Energy Co | SandRidge Energy vs. Northern Oil Gas |
| Diamondback Energy vs. Devon Energy | Diamondback Energy vs. Coterra Energy | Diamondback Energy vs. EOG Resources | Diamondback Energy vs. ConocoPhillips |
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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
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