Correlation Between SandRidge Energy and Range Resources
Can any of the company-specific risk be diversified away by investing in both SandRidge Energy and Range 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 Range 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 Range Resources Corp, you can compare the effects of market volatilities on SandRidge Energy and Range 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 Range Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of SandRidge Energy and Range Resources.
Diversification Opportunities for SandRidge Energy and Range Resources
0.77 | Correlation Coefficient |
Poor diversification
The 3 months correlation between SandRidge and Range is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding SandRidge Energy and Range Resources Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Range Resources Corp 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 Range Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Range Resources Corp has no effect on the direction of SandRidge Energy i.e., SandRidge Energy and Range Resources go up and down completely randomly.
Pair Corralation between SandRidge Energy and Range Resources
Allowing for the 90-day total investment horizon SandRidge Energy is expected to generate 1.21 times less return on investment than Range Resources. But when comparing it to its historical volatility, SandRidge Energy is 1.76 times less risky than Range Resources. It trades about 0.17 of its potential returns per unit of risk. Range Resources Corp is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest 3,598 in Range Resources Corp on November 1, 2024 and sell it today you would earn a total of 161.00 from holding Range Resources Corp or generate 4.47% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
SandRidge Energy vs. Range Resources Corp
Performance |
| Timeline |
| SandRidge Energy |
| Range Resources Corp |
SandRidge Energy and Range Resources Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SandRidge Energy and Range Resources
The main advantage of trading using opposite SandRidge Energy and Range Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SandRidge Energy position performs unexpectedly, Range 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 Range Resources will offset losses from the drop in Range Resources' long position.| SandRidge Energy vs. Range Resources Corp | SandRidge Energy vs. SM Energy Co | SandRidge Energy vs. Northern Oil Gas |
| Range Resources vs. Antero Resources Corp | Range Resources vs. EQT Corporation | Range Resources vs. Comstock Resources | Range Resources vs. Permian 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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