Correlation Between SM Energy and Mineral Financial

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

Diversification Opportunities for SM Energy and Mineral Financial

-0.45

Correlation Coefficient

SM Energy  Mineral Financial

Very good diversification

The 3 months correlation between 0KZA and Mineral is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding SM Energy Co and Mineral Financial Investments in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mineral Financial 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 Mineral Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mineral Financial has no effect on the direction of SM Energy i.e., SM Energy and Mineral Financial go up and down completely randomly.

Pair Corralation between SM Energy and Mineral Financial

Assuming the 90 days trading horizon SM Energy is expected to generate 1.86 times less return on investment than Mineral Financial. But when comparing it to its historical volatility, SM Energy Co is 1.2 times less risky than Mineral Financial. It trades about 0.04 of its potential returns per unit of risk. Mineral Financial Investments is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  1,150  in Mineral Financial Investments on October 24, 2024 and sell it today you would earn a total of  400.00  from holding Mineral Financial Investments or generate 34.78% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.81%
Values	Daily Returns

SM Energy Co  vs.  Mineral Financial Investments

SM Energy

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in SM Energy Co are ranked lower than 1 (%) 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 newest stock price uproar, may contribute to short-horizon losses for the private investors.

Mineral Financial

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Mineral Financial Investments are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Mineral Financial unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with SM Energy and Mineral Financial

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

The idea behind SM Energy Co and Mineral Financial Investments 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.