Correlation Between SM Energy and Civitas Resources
Can any of the company-specific risk be diversified away by investing in both SM Energy and Civitas 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 Civitas 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 Civitas Resources, you can compare the effects of market volatilities on SM Energy and Civitas 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 Civitas Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of SM Energy and Civitas Resources.
Diversification Opportunities for SM Energy and Civitas Resources
0.51 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between SM Energy and Civitas is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding SM Energy Co and Civitas Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Civitas 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 Civitas Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Civitas Resources has no effect on the direction of SM Energy i.e., SM Energy and Civitas Resources go up and down completely randomly.
Pair Corralation between SM Energy and Civitas Resources
Allowing for the 90-day total investment horizon SM Energy Co is expected to generate 1.15 times more return on investment than Civitas Resources. However, SM Energy is 1.15 times more volatile than Civitas Resources. It trades about 0.03 of its potential returns per unit of risk. Civitas Resources is currently generating about 0.01 per unit of risk. If you would invest 3,784 in SM Energy Co on August 24, 2024 and sell it today you would earn a total of 762.00 from holding SM Energy Co or generate 20.14% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
SM Energy Co vs. Civitas Resources
Performance |
| Timeline |
| SM Energy |
| Civitas Resources |
SM Energy and Civitas Resources Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SM Energy and Civitas Resources
The main advantage of trading using opposite SM Energy and Civitas Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SM Energy position performs unexpectedly, Civitas 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 Civitas Resources will offset losses from the drop in Civitas Resources' long position.| SM Energy vs. Vital Energy | SM Energy vs. Permian Resources | SM Energy vs. Matador Resources | SM Energy vs. Obsidian Energy |
| Civitas Resources vs. Magnolia Oil Gas | Civitas Resources vs. SM Energy Co | Civitas Resources vs. Range Resources Corp | Civitas Resources vs. Matador 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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