Correlation Between SDX Energy and Battalion Oil
Can any of the company-specific risk be diversified away by investing in both SDX Energy and Battalion Oil 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 SDX Energy and Battalion Oil into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between SDX Energy plc and Battalion Oil Corp, you can compare the effects of market volatilities on SDX Energy and Battalion Oil 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 SDX Energy with a short position of Battalion Oil. Check out your portfolio center. Please also check ongoing floating volatility patterns of SDX Energy and Battalion Oil.
Diversification Opportunities for SDX Energy and Battalion Oil
-0.21 | Correlation Coefficient |
Very good diversification
The 3 months correlation between SDX and Battalion is -0.21. Overlapping area represents the amount of risk that can be diversified away by holding SDX Energy plc and Battalion Oil Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Battalion Oil Corp and SDX 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 SDX Energy plc are associated (or correlated) with Battalion Oil. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Battalion Oil Corp has no effect on the direction of SDX Energy i.e., SDX Energy and Battalion Oil go up and down completely randomly.
Pair Corralation between SDX Energy and Battalion Oil
Assuming the 90 days horizon SDX Energy plc is expected to generate 2.93 times more return on investment than Battalion Oil. However, SDX Energy is 2.93 times more volatile than Battalion Oil Corp. It trades about 0.02 of its potential returns per unit of risk. Battalion Oil Corp is currently generating about -0.17 per unit of risk. If you would invest 1.92 in SDX Energy plc on September 1, 2024 and sell it today you would lose (1.21) from holding SDX Energy plc or give up 63.02% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 91.3% |
| Values | Daily Returns |
SDX Energy plc vs. Battalion Oil Corp
Performance |
| Timeline |
| SDX Energy plc |
| Battalion Oil Corp |
SDX Energy and Battalion Oil Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SDX Energy and Battalion Oil
The main advantage of trading using opposite SDX Energy and Battalion Oil positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SDX Energy position performs unexpectedly, Battalion Oil 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 Battalion Oil will offset losses from the drop in Battalion Oil's long position.| SDX Energy vs. Permian Resources | SDX Energy vs. Devon Energy | SDX Energy vs. EOG Resources | SDX Energy vs. Coterra Energy |
| Battalion Oil vs. Epsilon Energy | Battalion Oil vs. Citizens Community Bancorp | Battalion Oil vs. Perma Pipe International Holdings | Battalion Oil vs. Amplify Energy 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
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