Correlation Between Permian Resources and SandRidge Energy

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

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

Diversification Opportunities for Permian Resources and SandRidge Energy

0.91

Correlation Coefficient

Permian Resources  SandRidge Energy

Almost no diversification

The 3 months correlation between Permian and SandRidge is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Permian Resources and SandRidge Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SandRidge Energy and Permian 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 Permian Resources 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 Permian Resources i.e., Permian Resources and SandRidge Energy go up and down completely randomly.

Pair Corralation between Permian Resources and SandRidge Energy

Allowing for the 90-day total investment horizon Permian Resources is expected to generate 1.44 times more return on investment than SandRidge Energy. However, Permian Resources is 1.44 times more volatile than SandRidge Energy. It trades about -0.06 of its potential returns per unit of risk. SandRidge Energy is currently generating about -0.14 per unit of risk. If you would invest  1,460  in Permian Resources on February 4, 2025 and sell it today you would lose (272.00) from holding Permian Resources or give up 18.63% of portfolio value over 90 days.

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

Permian Resources  vs.  SandRidge Energy

Permian Resources

Risk-Adjusted Performance

Very Weak

Over the last 90 days Permian Resources has generated negative risk-adjusted returns adding no value to investors with long positions. Even with unsteady performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in June 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail 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 Permian Resources and SandRidge Energy

The main advantage of trading using opposite Permian Resources and SandRidge Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Permian Resources 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 Permian Resources 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.