Correlation Between SandRidge Energy and Permian Resources
Can any of the company-specific risk be diversified away by investing in both SandRidge Energy and Permian Resources 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 Permian Resources into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between SandRidge Energy and Permian Resources, you can compare the effects of market volatilities on SandRidge Energy and Permian Resources 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 Permian Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of SandRidge Energy and Permian Resources.
Diversification Opportunities for SandRidge Energy and Permian Resources
0.19 | Correlation Coefficient |
Average diversification
The 3 months correlation between SandRidge and Permian is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding SandRidge Energy and Permian Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Permian Resources 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 Permian Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Permian Resources has no effect on the direction of SandRidge Energy i.e., SandRidge Energy and Permian Resources go up and down completely randomly.
Pair Corralation between SandRidge Energy and Permian Resources
Allowing for the 90-day total investment horizon SandRidge Energy is expected to generate 30.69 times less return on investment than Permian Resources. But when comparing it to its historical volatility, SandRidge Energy is 1.0 times less risky than Permian Resources. It trades about 0.0 of its potential returns per unit of risk. Permian Resources is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 1,238 in Permian Resources on August 24, 2024 and sell it today you would earn a total of 361.00 from holding Permian Resources or generate 29.16% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
SandRidge Energy vs. Permian Resources
Performance |
| Timeline |
| SandRidge Energy |
| Permian Resources |
SandRidge Energy and Permian Resources Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SandRidge Energy and Permian Resources
The main advantage of trading using opposite SandRidge Energy and Permian Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SandRidge Energy position performs unexpectedly, Permian Resources 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 Permian Resources will offset losses from the drop in Permian Resources' long position.| SandRidge Energy vs. Range Resources Corp | SandRidge Energy vs. SM Energy Co | SandRidge Energy vs. Northern Oil Gas |
| Permian Resources vs. Devon Energy | Permian Resources vs. EOG Resources | Permian Resources vs. Coterra Energy | Permian Resources vs. Range Resources Corp |
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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.
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