Correlation Between Alien Metals and SM Energy
Can any of the company-specific risk be diversified away by investing in both Alien Metals and SM 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 Alien Metals and SM Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Alien Metals and SM Energy Co, you can compare the effects of market volatilities on Alien Metals and SM 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 Alien Metals with a short position of SM Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alien Metals and SM Energy.
Diversification Opportunities for Alien Metals and SM Energy
0.2 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Alien and 0KZA is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Alien Metals and SM Energy Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SM Energy and Alien Metals 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 Alien Metals are associated (or correlated) with SM Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SM Energy has no effect on the direction of Alien Metals i.e., Alien Metals and SM Energy go up and down completely randomly.
Pair Corralation between Alien Metals and SM Energy
Assuming the 90 days trading horizon Alien Metals is expected to under-perform the SM Energy. In addition to that, Alien Metals is 2.87 times more volatile than SM Energy Co. It trades about -0.09 of its total potential returns per unit of risk. SM Energy Co is currently generating about 0.35 per unit of volatility. If you would invest 3,764 in SM Energy Co on October 25, 2024 and sell it today you would earn a total of 431.00 from holding SM Energy Co or generate 11.45% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 95.0% |
| Values | Daily Returns |
Alien Metals vs. SM Energy Co
Performance |
| Timeline |
| Alien Metals |
| SM Energy |
Alien Metals and SM Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Alien Metals and SM Energy
The main advantage of trading using opposite Alien Metals and SM Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Alien Metals position performs unexpectedly, SM 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 SM Energy will offset losses from the drop in SM Energy's long position.| Alien Metals vs. Lundin Mining Corp | Alien Metals vs. Empire Metals Limited | Alien Metals vs. Software Circle plc | Alien Metals vs. Europa Metals |
| SM Energy vs. Alien Metals | SM Energy vs. Bankers Investment Trust | SM Energy vs. New Residential Investment | SM Energy vs. Europa Metals |
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 Stocks Directory module to find actively traded stocks across global markets.
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