Correlation Between Comstock Resources and SM Energy

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

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

Diversification Opportunities for Comstock Resources and SM Energy

0.32

Correlation Coefficient

Comstock Resources  SM Energy

Weak diversification

The 3 months correlation between Comstock and SM Energy is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding Comstock Resources and SM Energy Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SM Energy and Comstock Resources 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 Comstock Resources 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 Comstock Resources i.e., Comstock Resources and SM Energy go up and down completely randomly.

Pair Corralation between Comstock Resources and SM Energy

Considering the 90-day investment horizon Comstock Resources is expected to generate 1.27 times more return on investment than SM Energy. However, Comstock Resources is 1.27 times more volatile than SM Energy Co. It trades about 0.04 of its potential returns per unit of risk. SM Energy Co is currently generating about -0.12 per unit of risk. If you would invest  1,892  in Comstock Resources on December 29, 2024 and sell it today you would earn a total of  92.00  from holding Comstock Resources or generate 4.86% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Comstock Resources  vs.  SM Energy Co

Comstock Resources

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Comstock Resources are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite quite unsteady basic indicators, Comstock Resources may actually be approaching a critical reversion point that can send shares even higher in April 2025.

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 Comstock Resources and SM Energy

The main advantage of trading using opposite Comstock Resources and SM Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Comstock Resources 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 Comstock Resources 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.