Correlation Between Southwestern Energy and Newfield Exploration

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

Diversification Opportunities for Southwestern Energy and Newfield Exploration

0.0
  Correlation Coefficient

Pay attention - limited upside

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

Pair Corralation between Southwestern Energy and Newfield Exploration

If you would invest  612.00  in Southwestern Energy on December 30, 2023 and sell it today you would earn a total of  146.00  from holding Southwestern Energy or generate 23.86% return on investment over 90 days.
Time Period3 Months [change]
DirectionFlat 
StrengthInsignificant
Accuracy0.0%
ValuesDaily Returns

Southwestern Energy  vs.  Newfield Exploration

 Performance 
       Timeline  
Southwestern Energy 

Risk-Adjusted Performance

9 of 100

 
Low
 
High
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Southwestern Energy are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of very conflicting basic indicators, Southwestern Energy displayed solid returns over the last few months and may actually be approaching a breakup point.
Newfield Exploration 

Risk-Adjusted Performance

0 of 100

 
Low
 
High
Very Weak
Over the last 90 days Newfield Exploration has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong technical and fundamental indicators, Newfield Exploration is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Southwestern Energy and Newfield Exploration Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Southwestern Energy and Newfield Exploration

The main advantage of trading using opposite Southwestern Energy and Newfield Exploration positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Southwestern Energy position performs unexpectedly, Newfield Exploration 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 Newfield Exploration will offset losses from the drop in Newfield Exploration's long position.
The idea behind Southwestern Energy and Newfield Exploration 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.

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