Correlation Between Sanderson Farms and SM Energy
Can any of the company-specific risk be diversified away by investing in both Sanderson Farms 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 Sanderson Farms and SM Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Sanderson Farms and SM Energy Co, you can compare the effects of market volatilities on Sanderson Farms 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 Sanderson Farms with a short position of SM Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sanderson Farms and SM Energy.
Diversification Opportunities for Sanderson Farms and SM Energy
0.92 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Sanderson and SM Energy is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Sanderson Farms and SM Energy Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SM Energy and Sanderson Farms 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 Sanderson Farms 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 Sanderson Farms i.e., Sanderson Farms and SM Energy go up and down completely randomly.
Pair Corralation between Sanderson Farms and SM Energy
If you would invest 4,665 in SM Energy Co on January 17, 2024 and sell it today you would earn a total of 377.00 from holding SM Energy Co or generate 8.08% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 5.0% |
| Values | Daily Returns |
Sanderson Farms vs. SM Energy Co
Performance |
| Timeline |
| Sanderson Farms |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
| SM Energy |
Sanderson Farms and SM Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sanderson Farms and SM Energy
The main advantage of trading using opposite Sanderson Farms and SM Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sanderson Farms 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.| Sanderson Farms vs. Imperial Metals | Sanderson Farms vs. GPM Metals | Sanderson Farms vs. Centerra Gold | Sanderson Farms vs. Blue Moon Metals |
| SM Energy vs. Vital Energy | SM Energy vs. Permian Resources | SM Energy vs. Matador Resources | SM Energy vs. Obsidian Energy |
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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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