Correlation Between West Canyon and SM Energy

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

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

Diversification Opportunities for West Canyon and SM Energy

0.0

Correlation Coefficient

West Canyon  SM Energy

Pay attention - limited upside

The 3 months correlation between West and SM Energy is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding West Canyon Energy and SM Energy Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SM Energy and West Canyon 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 West Canyon Energy are associated (or correlated) with SM Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SM Energy has no effect on the direction of West Canyon i.e., West Canyon and SM Energy go up and down completely randomly.

Pair Corralation between West Canyon and SM Energy

If you would invest  3,858  in SM Energy Co on October 5, 2024 and sell it today you would earn a total of  200.00  from holding SM Energy Co or generate 5.18% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	91.94%
Values	Daily Returns

West Canyon Energy  vs.  SM Energy Co

West Canyon Energy

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days West Canyon Energy has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, West Canyon is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

SM Energy

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SM Energy Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's primary indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with West Canyon and SM Energy

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

The idea behind West Canyon Energy and SM Energy Co 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.