Correlation Between SM Energy and XXL Energy
Can any of the company-specific risk be diversified away by investing in both SM Energy and XXL 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 XXL 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 XXL Energy Corp, you can compare the effects of market volatilities on SM Energy and XXL 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 XXL Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of SM Energy and XXL Energy.
Diversification Opportunities for SM Energy and XXL Energy
0.23 | Correlation Coefficient |
Modest diversification
The 3 months correlation between SM Energy and XXL is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding SM Energy Co and XXL Energy Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on XXL Energy 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 XXL Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of XXL Energy Corp has no effect on the direction of SM Energy i.e., SM Energy and XXL Energy go up and down completely randomly.
Pair Corralation between SM Energy and XXL Energy
Allowing for the 90-day total investment horizon SM Energy Co is expected to generate 0.32 times more return on investment than XXL Energy. However, SM Energy Co is 3.17 times less risky than XXL Energy. It trades about 0.0 of its potential returns per unit of risk. XXL Energy Corp is currently generating about -0.09 per unit of risk. If you would invest 4,854 in SM Energy Co on August 24, 2024 and sell it today you would lose (308.00) from holding SM Energy Co or give up 6.35% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
SM Energy Co vs. XXL Energy Corp
Performance |
| Timeline |
| SM Energy |
| XXL Energy Corp |
SM Energy and XXL Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SM Energy and XXL Energy
The main advantage of trading using opposite SM Energy and XXL Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SM Energy position performs unexpectedly, XXL 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 XXL Energy will offset losses from the drop in XXL Energy's long position.| SM Energy vs. Vital Energy | SM Energy vs. Permian Resources | SM Energy vs. Matador Resources | SM Energy vs. Obsidian Energy |
| XXL Energy vs. East Africa Metals | XXL Energy vs. ABIVAX Socit Anonyme | XXL Energy vs. SCOR PK | XXL Energy vs. HUMANA INC |
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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.
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