Correlation Between SilverBow Resources and Diamondback Energy

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

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

Diversification Opportunities for SilverBow Resources and Diamondback Energy

0.08

Correlation Coefficient

SilverBow Resources  Diamondback Energy

Significant diversification

The 3 months correlation between SilverBow and Diamondback is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding SilverBow Resources and Diamondback Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Diamondback Energy and SilverBow 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 SilverBow Resources are associated (or correlated) with Diamondback Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Diamondback Energy has no effect on the direction of SilverBow Resources i.e., SilverBow Resources and Diamondback Energy go up and down completely randomly.

Pair Corralation between SilverBow Resources and Diamondback Energy

If you would invest (100.00) in SilverBow Resources on August 30, 2024 and sell it today you would earn a total of  100.00  from holding SilverBow Resources or generate -100.0% return on investment over 90 days.

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

SilverBow Resources  vs.  Diamondback Energy

SilverBow Resources

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SilverBow Resources has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, SilverBow Resources is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Diamondback Energy

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Diamondback Energy has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unfluctuating performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with SilverBow Resources and Diamondback Energy

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

The idea behind SilverBow Resources and Diamondback 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.

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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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.