Correlation Between SM Energy and Empire Petroleum
Can any of the company-specific risk be diversified away by investing in both SM Energy and Empire Petroleum 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 Empire Petroleum 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 Empire Petroleum Corp, you can compare the effects of market volatilities on SM Energy and Empire Petroleum 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 Empire Petroleum. Check out your portfolio center. Please also check ongoing floating volatility patterns of SM Energy and Empire Petroleum.
Diversification Opportunities for SM Energy and Empire Petroleum
0.49 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between SM Energy and Empire is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding SM Energy Co and Empire Petroleum Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Empire Petroleum Corp 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 Empire Petroleum. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Empire Petroleum Corp has no effect on the direction of SM Energy i.e., SM Energy and Empire Petroleum go up and down completely randomly.
Pair Corralation between SM Energy and Empire Petroleum
Allowing for the 90-day total investment horizon SM Energy is expected to generate 1.88 times less return on investment than Empire Petroleum. But when comparing it to its historical volatility, SM Energy Co is 1.86 times less risky than Empire Petroleum. It trades about 0.16 of its potential returns per unit of risk. Empire Petroleum Corp is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest 518.00 in Empire Petroleum Corp on August 27, 2024 and sell it today you would earn a total of 71.00 from holding Empire Petroleum Corp or generate 13.71% 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. Empire Petroleum Corp
Performance |
| Timeline |
| SM Energy |
| Empire Petroleum Corp |
SM Energy and Empire Petroleum Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SM Energy and Empire Petroleum
The main advantage of trading using opposite SM Energy and Empire Petroleum positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SM Energy position performs unexpectedly, Empire Petroleum 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 Empire Petroleum will offset losses from the drop in Empire Petroleum's long position.| SM Energy vs. Vital Energy | SM Energy vs. Permian Resources | SM Energy vs. Matador Resources | SM Energy vs. Obsidian Energy |
| Empire Petroleum vs. Devon Energy | Empire Petroleum vs. ConocoPhillips | Empire Petroleum vs. Occidental Petroleum | Empire Petroleum vs. Permian 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.
Other Complementary Tools
| USA ETFs Find actively traded Exchange Traded Funds (ETF) in USA | |
| Portfolio Anywhere Track or share privately all of your investments from the convenience of any device | |
| Piotroski F Score Get Piotroski F Score based on the binary analysis strategy of nine different fundamentals | |
| Premium Stories Follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope | |
| Theme Ratings Determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance |