Correlation Between Southwestern Energy and Pioneer Natural

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

Diversification Opportunities for Southwestern Energy and Pioneer Natural

0.82
  Correlation Coefficient

Very poor diversification

The 3 months correlation between Southwestern and Pioneer is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Southwestern Energy and Pioneer Natural Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pioneer Natural Resources 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 Pioneer Natural. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pioneer Natural Resources has no effect on the direction of Southwestern Energy i.e., Southwestern Energy and Pioneer Natural go up and down completely randomly.

Pair Corralation between Southwestern Energy and Pioneer Natural

Considering the 90-day investment horizon Southwestern Energy is expected to generate 1.35 times more return on investment than Pioneer Natural. However, Southwestern Energy is 1.35 times more volatile than Pioneer Natural Resources. It trades about 0.07 of its potential returns per unit of risk. Pioneer Natural Resources is currently generating about 0.07 per unit of risk. If you would invest  535.00  in Southwestern Energy on December 29, 2023 and sell it today you would earn a total of  216.00  from holding Southwestern Energy or generate 40.37% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthStrong
Accuracy100.0%
ValuesDaily Returns

Southwestern Energy  vs.  Pioneer Natural Resources

 Performance 
       Timeline  
Southwestern Energy 

Risk-Adjusted Performance

9 of 100

 
Low
 
High
Modest
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.
Pioneer Natural Resources 

Risk-Adjusted Performance

17 of 100

 
Low
 
High
Solid
Compared to the overall equity markets, risk-adjusted returns on investments in Pioneer Natural Resources are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of rather inconsistent basic indicators, Pioneer Natural exhibited solid returns over the last few months and may actually be approaching a breakup point.

Southwestern Energy and Pioneer Natural Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Southwestern Energy and Pioneer Natural

The main advantage of trading using opposite Southwestern Energy and Pioneer Natural positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Southwestern Energy position performs unexpectedly, Pioneer Natural 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 Pioneer Natural will offset losses from the drop in Pioneer Natural's long position.
The idea behind Southwestern Energy and Pioneer Natural Resources 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.

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