Correlation Between SM Energy and ARC Resources
Can any of the company-specific risk be diversified away by investing in both SM Energy and ARC 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 SM Energy and ARC Resources into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between SM Energy Co and ARC Resources, you can compare the effects of market volatilities on SM Energy and ARC 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 SM Energy with a short position of ARC Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of SM Energy and ARC Resources.
Diversification Opportunities for SM Energy and ARC Resources
-0.43 | Correlation Coefficient |
Very good diversification
The 3 months correlation between SM Energy and ARC is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding SM Energy Co and ARC Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ARC Resources and SM 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 SM Energy Co are associated (or correlated) with ARC Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ARC Resources has no effect on the direction of SM Energy i.e., SM Energy and ARC Resources go up and down completely randomly.
Pair Corralation between SM Energy and ARC Resources
If you would invest 4,348 in SM Energy Co on August 26, 2024 and sell it today you would earn a total of 255.00 from holding SM Energy Co or generate 5.86% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 4.55% |
| Values | Daily Returns |
SM Energy Co vs. ARC Resources
Performance |
| Timeline |
| SM Energy |
| ARC Resources |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
SM Energy and ARC Resources Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SM Energy and ARC Resources
The main advantage of trading using opposite SM Energy and ARC Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SM Energy position performs unexpectedly, ARC 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 ARC Resources will offset losses from the drop in ARC Resources' long position.| SM Energy vs. Vital Energy | SM Energy vs. Permian Resources | SM Energy vs. Matador Resources | SM Energy vs. Obsidian Energy |
| ARC Resources vs. Freehold Royalties | ARC Resources vs. Capricorn Energy PLC | ARC Resources vs. Laredo Oil | ARC Resources vs. Athabasca Oil 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.
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