Correlation Between Santos and Diamondback Energy
Can any of the company-specific risk be diversified away by investing in both Santos and Diamondback 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 Santos and Diamondback Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Santos and Diamondback Energy, you can compare the effects of market volatilities on Santos and Diamondback 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 Santos with a short position of Diamondback Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Santos and Diamondback Energy.
Diversification Opportunities for Santos and Diamondback Energy
0.22 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Santos and Diamondback is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding Santos and Diamondback Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Diamondback Energy and Santos 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 Santos are associated (or correlated) with Diamondback Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Diamondback Energy has no effect on the direction of Santos i.e., Santos and Diamondback Energy go up and down completely randomly.
Pair Corralation between Santos and Diamondback Energy
Assuming the 90 days horizon Santos is expected to generate 2.8 times less return on investment than Diamondback Energy. In addition to that, Santos is 1.74 times more volatile than Diamondback Energy. It trades about 0.01 of its total potential returns per unit of risk. Diamondback Energy is currently generating about 0.05 per unit of volatility. If you would invest 14,296 in Diamondback Energy on September 3, 2024 and sell it today you would earn a total of 3,287 from holding Diamondback Energy or generate 22.99% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 84.84% |
| Values | Daily Returns |
Santos vs. Diamondback Energy
Performance |
| Timeline |
| Santos |
| Diamondback Energy |
Santos and Diamondback Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Santos and Diamondback Energy
The main advantage of trading using opposite Santos and Diamondback Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Santos position performs unexpectedly, Diamondback 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 Diamondback Energy will offset losses from the drop in Diamondback Energy's long position.| Santos vs. CNX Resources Corp | Santos vs. MV Oil Trust | Santos vs. San Juan Basin | Santos vs. VOC Energy Trust |
| Diamondback Energy vs. Devon Energy | Diamondback Energy vs. Coterra Energy | Diamondback Energy vs. EOG Resources | Diamondback Energy vs. ConocoPhillips |
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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
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