Correlation Between Mulberry Group and SM Energy

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

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

Diversification Opportunities for Mulberry Group and SM Energy

0.04

Correlation Coefficient

Mulberry Group  SM Energy

Significant diversification

The 3 months correlation between Mulberry and 0KZA is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding Mulberry Group 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 Mulberry Group 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 Mulberry Group 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 Mulberry Group i.e., Mulberry Group and SM Energy go up and down completely randomly.

Pair Corralation between Mulberry Group and SM Energy

Assuming the 90 days trading horizon Mulberry Group PLC is expected to under-perform the SM Energy. But the stock apears to be less risky and, when comparing its historical volatility, Mulberry Group PLC is 2.35 times less risky than SM Energy. The stock trades about -0.12 of its potential returns per unit of risk. The SM Energy Co is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest  4,074  in SM Energy Co on October 13, 2024 and sell it today you would earn a total of  317.00  from holding SM Energy Co or generate 7.78% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	95.0%
Values	Daily Returns

Mulberry Group PLC  vs.  SM Energy Co

Mulberry Group PLC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Mulberry Group 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 technical and fundamental indicators remain rather sound which may send shares a bit higher in February 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

SM Energy

Risk-Adjusted Performance

0 of 100

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 comparatively stable basic indicators, SM Energy is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Mulberry Group and SM Energy

The main advantage of trading using opposite Mulberry Group and SM Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Mulberry Group 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 Mulberry Group 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.