Correlation Between SM Energy and Obsidian Energy
Can any of the company-specific risk be diversified away by investing in both SM Energy and Obsidian 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 Obsidian 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 Obsidian Energy, you can compare the effects of market volatilities on SM Energy and Obsidian 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 Obsidian Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of SM Energy and Obsidian Energy.
Diversification Opportunities for SM Energy and Obsidian Energy
0.62 | Correlation Coefficient |
Poor diversification
The 3 months correlation between SM Energy and Obsidian is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding SM Energy Co and Obsidian Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Obsidian 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 Obsidian Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Obsidian Energy has no effect on the direction of SM Energy i.e., SM Energy and Obsidian Energy go up and down completely randomly.
Pair Corralation between SM Energy and Obsidian Energy
Allowing for the 90-day total investment horizon SM Energy Co is expected to generate 0.78 times more return on investment than Obsidian Energy. However, SM Energy Co is 1.28 times less risky than Obsidian Energy. It trades about 0.17 of its potential returns per unit of risk. Obsidian Energy is currently generating about 0.07 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 | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
SM Energy Co vs. Obsidian Energy
Performance |
| Timeline |
| SM Energy |
| Obsidian Energy |
SM Energy and Obsidian Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SM Energy and Obsidian Energy
The main advantage of trading using opposite SM Energy and Obsidian Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SM Energy position performs unexpectedly, Obsidian 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 Obsidian Energy will offset losses from the drop in Obsidian Energy's long position.| SM Energy vs. Vital Energy | SM Energy vs. Permian Resources | SM Energy vs. Matador Resources | SM Energy vs. Obsidian Energy |
| Obsidian Energy vs. Baytex Energy Corp | Obsidian Energy vs. Vermilion Energy | Obsidian Energy vs. Canadian Natural Resources | Obsidian Energy vs. Ovintiv |
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
| Portfolio Analyzer Portfolio analysis module that provides access to portfolio diagnostics and optimization engine | |
| Portfolio Manager State of the art Portfolio Manager to monitor and improve performance of your invested capital | |
| Odds Of Bankruptcy Get analysis of equity chance of financial distress in the next 2 years | |
| Equity Forecasting Use basic forecasting models to generate price predictions and determine price momentum | |
| Price Ceiling Movement Calculate and plot Price Ceiling Movement for different equity instruments |