Correlation Between SM Energy and Fonix Mobile

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

Diversification Opportunities for SM Energy and Fonix Mobile

-0.1

Correlation Coefficient

SM Energy  Fonix Mobile

Good diversification

The 3 months correlation between 0KZA and Fonix is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding SM Energy Co and Fonix Mobile plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fonix Mobile plc 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 Fonix Mobile. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fonix Mobile plc has no effect on the direction of SM Energy i.e., SM Energy and Fonix Mobile go up and down completely randomly.

Pair Corralation between SM Energy and Fonix Mobile

Assuming the 90 days trading horizon SM Energy Co is expected to generate 1.04 times more return on investment than Fonix Mobile. However, SM Energy is 1.04 times more volatile than Fonix Mobile plc. It trades about -0.12 of its potential returns per unit of risk. Fonix Mobile plc is currently generating about -0.29 per unit of risk. If you would invest  4,352  in SM Energy Co on September 13, 2024 and sell it today you would lose (296.00) from holding SM Energy Co or give up 6.8% of portfolio value over 90 days.

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

SM Energy Co  vs.  Fonix Mobile plc

SM Energy

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in SM Energy Co are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, SM Energy is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Fonix Mobile plc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Fonix Mobile plc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with SM Energy and Fonix Mobile

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

The idea behind SM Energy Co and Fonix Mobile plc 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.