Correlation Between Hess and SandRidge Energy

Can any of the company-specific risk be diversified away by investing in both Hess and SandRidge 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 Hess and SandRidge Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Hess Corporation and SandRidge Energy, you can compare the effects of market volatilities on Hess and SandRidge 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 Hess with a short position of SandRidge Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hess and SandRidge Energy.

Diversification Opportunities for Hess and SandRidge Energy

0.76

Correlation Coefficient

Hess  SandRidge Energy

Poor diversification

The 3 months correlation between Hess and SandRidge is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Hess Corp. and SandRidge Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SandRidge Energy and Hess 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 Hess Corporation are associated (or correlated) with SandRidge Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SandRidge Energy has no effect on the direction of Hess i.e., Hess and SandRidge Energy go up and down completely randomly.

Pair Corralation between Hess and SandRidge Energy

Considering the 90-day investment horizon Hess Corporation is expected to generate 0.9 times more return on investment than SandRidge Energy. However, Hess Corporation is 1.11 times less risky than SandRidge Energy. It trades about -0.03 of its potential returns per unit of risk. SandRidge Energy is currently generating about -0.13 per unit of risk. If you would invest  13,856  in Hess Corporation on January 31, 2025 and sell it today you would lose (951.00) from holding Hess Corporation or give up 6.86% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Hess Corp.  vs.  SandRidge Energy

Hess

Risk-Adjusted Performance

Very Weak

Over the last 90 days Hess Corporation has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable technical and fundamental indicators, Hess is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

SandRidge Energy

Risk-Adjusted Performance

Very Weak

Over the last 90 days SandRidge Energy has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's fundamental indicators remain rather sound which may send shares a bit higher in June 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Hess and SandRidge Energy

The main advantage of trading using opposite Hess and SandRidge Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hess position performs unexpectedly, SandRidge 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 SandRidge Energy will offset losses from the drop in SandRidge Energy's long position.

The idea behind Hess Corporation and SandRidge Energy pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..