Correlation Between Range Resources and SM Energy
Can any of the company-specific risk be diversified away by investing in both Range Resources 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 Range Resources and SM Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Range Resources Corp and SM Energy Co, you can compare the effects of market volatilities on Range Resources 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 Range Resources with a short position of SM Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Range Resources and SM Energy.
Diversification Opportunities for Range Resources and SM Energy
0.95 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Range and SM Energy is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding Range Resources Corp and SM Energy Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SM Energy and Range Resources 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 Range Resources Corp 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 Range Resources i.e., Range Resources and SM Energy go up and down completely randomly.
Pair Corralation between Range Resources and SM Energy
Considering the 90-day investment horizon Range Resources Corp is expected to generate 0.99 times more return on investment than SM Energy. However, Range Resources Corp is 1.01 times less risky than SM Energy. It trades about 0.28 of its potential returns per unit of risk. SM Energy Co is currently generating about -0.04 per unit of risk. If you would invest 3,344 in Range Resources Corp on January 24, 2024 and sell it today you would earn a total of 267.00 from holding Range Resources Corp or generate 7.98% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Range Resources Corp vs. SM Energy Co
Performance |
| Timeline |
| Range Resources Corp |
| SM Energy |
Range Resources and SM Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Range Resources and SM Energy
The main advantage of trading using opposite Range Resources and SM Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Range Resources 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.| Range Resources vs. Chesapeake Energy Corp | Range Resources vs. Antero Resources Corp | Range Resources vs. EQT Corporation | Range Resources vs. Comstock Resources |
| SM Energy vs. Vital Energy | SM Energy vs. Permian Resources | SM Energy vs. Matador Resources | SM Energy vs. Obsidian Energy |
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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..
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