Correlation Between SandRidge Energy and Talos Energy

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

Diversification Opportunities for SandRidge Energy and Talos Energy

0.54
  Correlation Coefficient

Very weak diversification

The 3 months correlation between SandRidge and Talos is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding SandRidge Energy and Talos Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Talos Energy 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 Talos Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Talos Energy has no effect on the direction of SandRidge Energy i.e., SandRidge Energy and Talos Energy go up and down completely randomly.

Pair Corralation between SandRidge Energy and Talos Energy

Allowing for the 90-day total investment horizon SandRidge Energy is expected to generate 0.9 times more return on investment than Talos Energy. However, SandRidge Energy is 1.11 times less risky than Talos Energy. It trades about 0.43 of its potential returns per unit of risk. Talos Energy is currently generating about 0.38 per unit of risk. If you would invest  1,050  in SandRidge Energy on October 23, 2024 and sell it today you would earn a total of  187.00  from holding SandRidge Energy or generate 17.81% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

SandRidge Energy  vs.  Talos Energy

 Performance 
       Timeline  
SandRidge Energy 

Risk-Adjusted Performance

7 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in SandRidge Energy are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady fundamental indicators, SandRidge Energy may actually be approaching a critical reversion point that can send shares even higher in February 2025.
Talos Energy 

Risk-Adjusted Performance

4 of 100

 
Weak
 
Strong
Modest
Compared to the overall equity markets, risk-adjusted returns on investments in Talos Energy are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of very abnormal essential indicators, Talos Energy may actually be approaching a critical reversion point that can send shares even higher in February 2025.

SandRidge Energy and Talos Energy Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with SandRidge Energy and Talos Energy

The main advantage of trading using opposite SandRidge Energy and Talos Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SandRidge Energy position performs unexpectedly, Talos 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 Talos Energy will offset losses from the drop in Talos Energy's long position.
The idea behind SandRidge Energy and Talos 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.
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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.

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