Correlation Between SandRidge Energy and North European
Can any of the company-specific risk be diversified away by investing in both SandRidge Energy and North European 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 North European into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between SandRidge Energy and North European Oil, you can compare the effects of market volatilities on SandRidge Energy and North European 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 North European. Check out your portfolio center. Please also check ongoing floating volatility patterns of SandRidge Energy and North European.
Diversification Opportunities for SandRidge Energy and North European
0.52 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between SandRidge and North is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding SandRidge Energy and North European Oil in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on North European Oil 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 North European. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of North European Oil has no effect on the direction of SandRidge Energy i.e., SandRidge Energy and North European go up and down completely randomly.
Pair Corralation between SandRidge Energy and North European
Allowing for the 90-day total investment horizon SandRidge Energy is expected to under-perform the North European. But the stock apears to be less risky and, when comparing its historical volatility, SandRidge Energy is 2.43 times less risky than North European. The stock trades about -0.05 of its potential returns per unit of risk. The North European Oil is currently generating about 0.02 of returns per unit of risk over similar time horizon. 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 |
SandRidge Energy vs. North European Oil
Performance |
| Timeline |
| SandRidge Energy |
| North European Oil |
SandRidge Energy and North European Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SandRidge Energy and North European
The main advantage of trading using opposite SandRidge Energy and North European positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SandRidge Energy position performs unexpectedly, North European 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 North European will offset losses from the drop in North European's long position.| SandRidge Energy vs. Range Resources Corp | SandRidge Energy vs. SM Energy Co | SandRidge Energy vs. Northern Oil Gas |
| North European vs. Cross Timbers Royalty | North European vs. VOC Energy Trust | North European vs. Sabine Royalty Trust | North European vs. Permianville Royalty Trust |
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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
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