Correlation Between Southwestern Energy and Diamondback Energy
Can any of the company-specific risk be diversified away by investing in both Southwestern Energy 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 Southwestern Energy and Diamondback Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Southwestern Energy and Diamondback Energy, you can compare the effects of market volatilities on Southwestern Energy 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 Southwestern Energy with a short position of Diamondback Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Southwestern Energy and Diamondback Energy.
Diversification Opportunities for Southwestern Energy and Diamondback Energy
-0.1 | Correlation Coefficient |
Good diversification
The 3 months correlation between Southwestern and Diamondback is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding Southwestern Energy and Diamondback Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Diamondback Energy and Southwestern 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 Southwestern Energy 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 Southwestern Energy i.e., Southwestern Energy and Diamondback Energy go up and down completely randomly.
Pair Corralation between Southwestern Energy and Diamondback Energy
If you would invest 711.00 in Southwestern Energy on September 25, 2024 and sell it today you would earn a total of 0.00 from holding Southwestern Energy or generate 0.0% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Insignificant |
Accuracy | 5.0% |
Values | Daily Returns |
Southwestern Energy vs. Diamondback Energy
Performance |
Timeline |
Southwestern Energy |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Excellent
Diamondback Energy |
Southwestern Energy and Diamondback Energy Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Southwestern Energy and Diamondback Energy
The main advantage of trading using opposite Southwestern Energy and Diamondback Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Southwestern Energy 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.Southwestern Energy vs. Antero Resources Corp | Southwestern Energy vs. EQT Corporation | Southwestern Energy vs. Matador Resources | Southwestern Energy vs. Range Resources Corp |
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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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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