Correlation Between Flutter Entertainment and SM Energy

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

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

Diversification Opportunities for Flutter Entertainment and SM Energy

0.66

Correlation Coefficient

Flutter Entertainment  SM Energy

Poor diversification

The 3 months correlation between Flutter and 0KZA is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Flutter Entertainment PLC and SM Energy Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SM Energy and Flutter Entertainment 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 Flutter Entertainment PLC 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 Flutter Entertainment i.e., Flutter Entertainment and SM Energy go up and down completely randomly.

Pair Corralation between Flutter Entertainment and SM Energy

Assuming the 90 days trading horizon Flutter Entertainment PLC is expected to generate 0.8 times more return on investment than SM Energy. However, Flutter Entertainment PLC is 1.26 times less risky than SM Energy. It trades about -0.09 of its potential returns per unit of risk. SM Energy Co is currently generating about -0.14 per unit of risk. If you would invest  2,072,000  in Flutter Entertainment PLC on December 30, 2024 and sell it today you would lose (292,500) from holding Flutter Entertainment PLC or give up 14.12% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	96.92%
Values	Daily Returns

Flutter Entertainment PLC  vs.  SM Energy Co

Flutter Entertainment PLC

Risk-Adjusted Performance

Very Weak

Over the last 90 days Flutter Entertainment PLC 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.

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.

Pair Trading with Flutter Entertainment and SM Energy

The main advantage of trading using opposite Flutter Entertainment and SM Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Flutter Entertainment 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 Flutter Entertainment PLC 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.