Correlation Between SM Energy and Bankers Investment

Can any of the company-specific risk be diversified away by investing in both SM Energy and Bankers Investment 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 Bankers Investment 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 Bankers Investment Trust, you can compare the effects of market volatilities on SM Energy and Bankers Investment 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 Bankers Investment. Check out your portfolio center. Please also check ongoing floating volatility patterns of SM Energy and Bankers Investment.

Diversification Opportunities for SM Energy and Bankers Investment

0.35

Correlation Coefficient

SM Energy  Bankers Investment

Weak diversification

The 3 months correlation between 0KZA and Bankers is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding SM Energy Co and Bankers Investment Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bankers Investment Trust 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 Bankers Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bankers Investment Trust has no effect on the direction of SM Energy i.e., SM Energy and Bankers Investment go up and down completely randomly.

Pair Corralation between SM Energy and Bankers Investment

Assuming the 90 days trading horizon SM Energy Co is expected to under-perform the Bankers Investment. In addition to that, SM Energy is 2.76 times more volatile than Bankers Investment Trust. It trades about -0.09 of its total potential returns per unit of risk. Bankers Investment Trust is currently generating about 0.01 per unit of volatility. If you would invest  11,399  in Bankers Investment Trust on December 23, 2024 and sell it today you would earn a total of  1.00  from holding Bankers Investment Trust or generate 0.01% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	96.83%
Values	Daily Returns

SM Energy Co  vs.  Bankers Investment Trust

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.

Bankers Investment Trust

Risk-Adjusted Performance

Very Weak

Over the last 90 days Bankers Investment Trust has generated negative risk-adjusted returns adding no value to fund investors. In spite of comparatively stable basic indicators, Bankers Investment is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with SM Energy and Bankers Investment

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

The idea behind SM Energy Co and Bankers Investment Trust 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.