Correlation Between SM Energy and Blue Star

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

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

Diversification Opportunities for SM Energy and Blue Star

0.09

Correlation Coefficient

SM Energy  Blue Star

Significant diversification

The 3 months correlation between 0KZA and Blue is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding SM Energy Co and Blue Star Capital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Blue Star Capital and SM Energy 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 SM Energy Co are associated (or correlated) with Blue Star. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Blue Star Capital has no effect on the direction of SM Energy i.e., SM Energy and Blue Star go up and down completely randomly.

Pair Corralation between SM Energy and Blue Star

Assuming the 90 days trading horizon SM Energy Co is expected to under-perform the Blue Star. But the stock apears to be less risky and, when comparing its historical volatility, SM Energy Co is 45.63 times less risky than Blue Star. The stock trades about -0.09 of its potential returns per unit of risk. The Blue Star Capital is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  350.00  in Blue Star Capital on December 21, 2024 and sell it today you would earn a total of  400.00  from holding Blue Star Capital or generate 114.29% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	96.72%
Values	Daily Returns

SM Energy Co  vs.  Blue Star Capital

SM Energy

Risk-Adjusted Performance

Very Weak

Over the last 90 days SM Energy Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Blue Star Capital

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Blue Star Capital are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, Blue Star exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with SM Energy and Blue Star

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

The idea behind SM Energy Co and Blue Star Capital 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.

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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.