Correlation Between SandRidge Energy and Civitas Resources

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

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

Diversification Opportunities for SandRidge Energy and Civitas Resources

0.89

Correlation Coefficient

SandRidge Energy  Civitas Resources

Very poor diversification

The 3 months correlation between SandRidge and Civitas is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding SandRidge Energy and Civitas Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Civitas Resources and SandRidge Energy 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 SandRidge Energy are associated (or correlated) with Civitas Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Civitas Resources has no effect on the direction of SandRidge Energy i.e., SandRidge Energy and Civitas Resources go up and down completely randomly.

Pair Corralation between SandRidge Energy and Civitas Resources

Allowing for the 90-day total investment horizon SandRidge Energy is expected to generate 0.96 times more return on investment than Civitas Resources. However, SandRidge Energy is 1.05 times less risky than Civitas Resources. It trades about -0.07 of its potential returns per unit of risk. Civitas Resources is currently generating about -0.07 per unit of risk. If you would invest  1,288  in SandRidge Energy on September 2, 2024 and sell it today you would lose (115.00) from holding SandRidge Energy or give up 8.93% of portfolio value over 90 days.

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

SandRidge Energy  vs.  Civitas Resources

SandRidge Energy

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SandRidge Energy has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Civitas Resources

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Civitas Resources has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the firm traders.

Pair Trading with SandRidge Energy and Civitas Resources

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

The idea behind SandRidge Energy and Civitas Resources 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.

Check out your portfolio center.

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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.