Correlation Between Pioneer Natural and SM Energy
Can any of the company-specific risk be diversified away by investing in both Pioneer Natural 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 Pioneer Natural and SM Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Pioneer Natural Resources and SM Energy Co, you can compare the effects of market volatilities on Pioneer Natural 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 Pioneer Natural with a short position of SM Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pioneer Natural and SM Energy.
Diversification Opportunities for Pioneer Natural and SM Energy
0.96 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Pioneer and SM Energy is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding Pioneer Natural Resources and SM Energy Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SM Energy and Pioneer Natural 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 Pioneer Natural Resources 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 Pioneer Natural i.e., Pioneer Natural and SM Energy go up and down completely randomly.
Pair Corralation between Pioneer Natural and SM Energy
Considering the 90-day investment horizon Pioneer Natural Resources is expected to generate 0.59 times more return on investment than SM Energy. However, Pioneer Natural Resources is 1.7 times less risky than SM Energy. It trades about 0.36 of its potential returns per unit of risk. SM Energy Co is currently generating about 0.04 per unit of risk. If you would invest 25,821 in Pioneer Natural Resources on January 25, 2024 and sell it today you would earn a total of 1,731 from holding Pioneer Natural Resources or generate 6.7% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Pioneer Natural Resources vs. SM Energy Co
Performance |
| Timeline |
| Pioneer Natural Resources |
| SM Energy |
Pioneer Natural and SM Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Pioneer Natural and SM Energy
The main advantage of trading using opposite Pioneer Natural and SM Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Pioneer Natural 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.| Pioneer Natural vs. Coterra Energy | Pioneer Natural vs. Occidental Petroleum | Pioneer Natural vs. Diamondback Energy | Pioneer Natural vs. ConocoPhillips |
| 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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