Correlation Between Bakken Energy and Southwestern Energy

Can any of the company-specific risk be diversified away by investing in both Bakken Energy and Southwestern Energy 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 Bakken Energy and Southwestern Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Bakken Energy Corp and Southwestern Energy, you can compare the effects of market volatilities on Bakken Energy and Southwestern Energy 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 Bakken Energy with a short position of Southwestern Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bakken Energy and Southwestern Energy.

Diversification Opportunities for Bakken Energy and Southwestern Energy

0.0

Correlation Coefficient

Bakken Energy  Southwestern Energy

Pay attention - limited upside

The 3 months correlation between Bakken and Southwestern is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Bakken Energy Corp and Southwestern Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Southwestern Energy and Bakken 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 Bakken Energy Corp are associated (or correlated) with Southwestern Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Southwestern Energy has no effect on the direction of Bakken Energy i.e., Bakken Energy and Southwestern Energy go up and down completely randomly.

Pair Corralation between Bakken Energy and Southwestern Energy

If you would invest  617.00  in Southwestern Energy on September 2, 2024 and sell it today you would earn a total of  94.00  from holding Southwestern Energy or generate 15.24% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	32.81%
Values	Daily Returns

Bakken Energy Corp  vs.  Southwestern Energy

Bakken Energy Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Bakken Energy Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy technical and fundamental indicators, Bakken Energy is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Southwestern Energy

Risk-Adjusted Performance

0 of 100

Very Strong

Over the last 90 days Southwestern Energy has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very weak basic indicators, Southwestern Energy displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Bakken Energy and Southwestern Energy

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

The idea behind Bakken Energy Corp and Southwestern Energy 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.