Correlation Between SM Energy and Vaalco Energy
Can any of the company-specific risk be diversified away by investing in both SM Energy and Vaalco Energy 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 Vaalco Energy 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 Vaalco Energy, you can compare the effects of market volatilities on SM Energy and Vaalco Energy 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 Vaalco Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of SM Energy and Vaalco Energy.
Diversification Opportunities for SM Energy and Vaalco Energy
0.53 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between SM Energy and Vaalco is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding SM Energy Co and Vaalco Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vaalco Energy 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 Vaalco Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vaalco Energy has no effect on the direction of SM Energy i.e., SM Energy and Vaalco Energy go up and down completely randomly.
Pair Corralation between SM Energy and Vaalco Energy
Allowing for the 90-day total investment horizon SM Energy Co is expected to generate 1.25 times more return on investment than Vaalco Energy. However, SM Energy is 1.25 times more volatile than Vaalco Energy. It trades about 0.17 of its potential returns per unit of risk. Vaalco Energy is currently generating about -0.13 per unit of risk. If you would invest 4,178 in SM Energy Co on August 24, 2024 and sell it today you would earn a total of 368.00 from holding SM Energy Co or generate 8.81% 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. Vaalco Energy
Performance |
| Timeline |
| SM Energy |
| Vaalco Energy |
SM Energy and Vaalco Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SM Energy and Vaalco Energy
The main advantage of trading using opposite SM Energy and Vaalco Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SM Energy position performs unexpectedly, Vaalco Energy 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 Vaalco Energy will offset losses from the drop in Vaalco Energy's long position.| SM Energy vs. Vital Energy | SM Energy vs. Permian Resources | SM Energy vs. Matador Resources | SM Energy vs. Obsidian Energy |
| Vaalco Energy vs. Epsilon Energy | Vaalco Energy vs. PHX Minerals | Vaalco Energy vs. Northern Oil Gas | Vaalco Energy vs. Gran Tierra Energy |
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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.
Other Complementary Tools
| Latest Portfolios Quick portfolio dashboard that showcases your latest portfolios | |
| Transaction History View history of all your transactions and understand their impact on performance | |
| Top Crypto Exchanges Search and analyze digital assets across top global cryptocurrency exchanges | |
| Odds Of Bankruptcy Get analysis of equity chance of financial distress in the next 2 years | |
| Bond Analysis Evaluate and analyze corporate bonds as a potential investment for your portfolios. |