Correlation Between Callon Petroleum and SM Energy

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

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

Diversification Opportunities for Callon Petroleum and SM Energy

0.0

Correlation Coefficient

Callon Petroleum  SM Energy

Pay attention - limited upside

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

Pair Corralation between Callon Petroleum and SM Energy

If you would invest (100.00) in Callon Petroleum on December 29, 2024 and sell it today you would earn a total of  100.00  from holding Callon Petroleum or generate -100.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

Callon Petroleum  vs.  SM Energy Co

Callon Petroleum

Risk-Adjusted Performance

Very Weak

Over the last 90 days Callon Petroleum has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Callon Petroleum is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

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 unsteady performance in the last few months, the Stock's primary indicators remain very healthy which may send shares a bit higher in April 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Callon Petroleum and SM Energy

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

The idea behind Callon Petroleum and SM Energy Co 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.