Correlation Between SandRidge Energy and ConocoPhillips

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Can any of the company-specific risk be diversified away by investing in both SandRidge Energy and ConocoPhillips 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 ConocoPhillips into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between SandRidge Energy and ConocoPhillips, you can compare the effects of market volatilities on SandRidge Energy and ConocoPhillips 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 ConocoPhillips. Check out your portfolio center. Please also check ongoing floating volatility patterns of SandRidge Energy and ConocoPhillips.

Diversification Opportunities for SandRidge Energy and ConocoPhillips

SandRidgeConocoPhillipsDiversified AwaySandRidgeConocoPhillipsDiversified Away100%
0.74
  Correlation Coefficient

Poor diversification

The 3 months correlation between SandRidge and ConocoPhillips is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding SandRidge Energy and ConocoPhillips in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ConocoPhillips 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 ConocoPhillips. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ConocoPhillips has no effect on the direction of SandRidge Energy i.e., SandRidge Energy and ConocoPhillips go up and down completely randomly.

Pair Corralation between SandRidge Energy and ConocoPhillips

Allowing for the 90-day total investment horizon SandRidge Energy is expected to generate 1.29 times more return on investment than ConocoPhillips. However, SandRidge Energy is 1.29 times more volatile than ConocoPhillips. It trades about 0.0 of its potential returns per unit of risk. ConocoPhillips is currently generating about -0.01 per unit of risk. If you would invest  1,226  in SandRidge Energy on September 26, 2024 and sell it today you would lose (176.00) from holding SandRidge Energy or give up 14.36% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

SandRidge Energy  vs.  ConocoPhillips

 Performance 
JavaScript chart by amCharts 3.21.15OctNovDec -10-505
JavaScript chart by amCharts 3.21.15SD COP
       Timeline  
SandRidge Energy 

Risk-Adjusted Performance

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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 conflicting 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.
JavaScript chart by amCharts 3.21.15OctNovDecNovDec10.51111.51212.513
ConocoPhillips 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days ConocoPhillips has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, ConocoPhillips is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.
JavaScript chart by amCharts 3.21.15OctNovDecNovDec95100105110115

SandRidge Energy and ConocoPhillips Volatility Contrast

   Predicted Return Density   
JavaScript chart by amCharts 3.21.15-3.18-2.38-1.58-0.790.00.721.442.162.87 0.060.070.080.090.100.110.120.13
JavaScript chart by amCharts 3.21.15SD COP
       Returns  

Pair Trading with SandRidge Energy and ConocoPhillips

The main advantage of trading using opposite SandRidge Energy and ConocoPhillips positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SandRidge Energy position performs unexpectedly, ConocoPhillips 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 ConocoPhillips will offset losses from the drop in ConocoPhillips' long position.
The idea behind SandRidge Energy and ConocoPhillips 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.

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