Correlation Between SM Energy and Impax Asset

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

Diversification Opportunities for SM Energy and Impax Asset

0.31

Correlation Coefficient

SM Energy  Impax Asset

Weak diversification

The 3 months correlation between 0KZA and Impax is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding SM Energy Co and Impax Asset Management in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Impax Asset Management 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 Impax Asset. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Impax Asset Management has no effect on the direction of SM Energy i.e., SM Energy and Impax Asset go up and down completely randomly.

Pair Corralation between SM Energy and Impax Asset

Assuming the 90 days trading horizon SM Energy Co is expected to generate 0.66 times more return on investment than Impax Asset. However, SM Energy Co is 1.51 times less risky than Impax Asset. It trades about 0.35 of its potential returns per unit of risk. Impax Asset Management is currently generating about -0.37 per unit of risk. If you would invest  3,764  in SM Energy Co on October 25, 2024 and sell it today you would earn a total of  431.00  from holding SM Energy Co or generate 11.45% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	95.0%
Values	Daily Returns

SM Energy Co  vs.  Impax Asset Management

SM Energy

Risk-Adjusted Performance

0 of 100

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 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.

Impax Asset Management

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Impax Asset Management 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 technical and fundamental indicators remain rather sound which may send shares a bit higher in February 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with SM Energy and Impax Asset

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

The idea behind SM Energy Co and Impax Asset Management 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.