Correlation Between SM Energy and MG Credit

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

Diversification Opportunities for SM Energy and MG Credit

-0.13

Correlation Coefficient

SM Energy  MG Credit

Good diversification

The 3 months correlation between 0KZA and MGCI is -0.13. Overlapping area represents the amount of risk that can be diversified away by holding SM Energy Co and MG Credit Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MG Credit Income 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 MG Credit. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MG Credit Income has no effect on the direction of SM Energy i.e., SM Energy and MG Credit go up and down completely randomly.

Pair Corralation between SM Energy and MG Credit

Assuming the 90 days trading horizon SM Energy Co is expected to under-perform the MG Credit. In addition to that, SM Energy is 3.11 times more volatile than MG Credit Income. It trades about -0.09 of its total potential returns per unit of risk. MG Credit Income is currently generating about 0.02 per unit of volatility. If you would invest  9,395  in MG Credit Income on December 21, 2024 and sell it today you would earn a total of  105.00  from holding MG Credit Income or generate 1.12% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	96.77%
Values	Daily Returns

SM Energy Co  vs.  MG Credit Income

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.

MG Credit Income

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in MG Credit Income are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, MG Credit 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 MG Credit

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

The idea behind SM Energy Co and MG Credit Income 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.