Correlation Between SDX Energy and Permian Resources
Can any of the company-specific risk be diversified away by investing in both SDX 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 SDX 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 SDX Energy plc and Permian Resources, you can compare the effects of market volatilities on SDX 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 SDX Energy with a short position of Permian Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of SDX Energy and Permian Resources.
Diversification Opportunities for SDX Energy and Permian Resources
0.05 | Correlation Coefficient |
Significant diversification
The 3 months correlation between SDX and Permian is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding SDX Energy plc and Permian Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Permian Resources 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 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 SDX Energy i.e., SDX Energy and Permian Resources go up and down completely randomly.
Pair Corralation between SDX Energy and Permian Resources
Assuming the 90 days horizon SDX Energy plc is expected to generate 13.39 times more return on investment than Permian Resources. However, SDX Energy is 13.39 times more volatile than Permian Resources. It trades about 0.07 of its potential returns per unit of risk. Permian Resources is currently generating about 0.04 per unit of risk. If you would invest 6.00 in SDX Energy plc on August 25, 2024 and sell it today you would lose (4.00) from holding SDX Energy plc or give up 66.67% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
SDX Energy plc vs. Permian Resources
Performance |
| Timeline |
| SDX Energy plc |
| Permian Resources |
SDX Energy and Permian Resources Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SDX Energy and Permian Resources
The main advantage of trading using opposite SDX Energy and Permian Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SDX 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.| SDX Energy vs. Permian Resources | SDX Energy vs. Devon Energy | SDX Energy vs. EOG Resources | SDX Energy vs. Coterra Energy |
| 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.
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