Correlation Between Cabot Oil and SM Energy

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

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

Diversification Opportunities for Cabot Oil and SM Energy

0.0

Correlation Coefficient

Cabot Oil  SM Energy

Pay attention - limited upside

The 3 months correlation between Cabot and SM Energy is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Cabot Oil Gas and SM Energy Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SM Energy and Cabot Oil 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 Cabot Oil Gas 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 Cabot Oil i.e., Cabot Oil and SM Energy go up and down completely randomly.

Pair Corralation between Cabot Oil and SM Energy

If you would invest  4,778  in SM Energy Co on January 19, 2024 and sell it today you would earn a total of  151.00  from holding SM Energy Co or generate 3.16% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

Cabot Oil Gas  vs.  SM Energy Co

Cabot Oil Gas

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Cabot Oil Gas has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Cabot Oil is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

SM Energy

Risk-Adjusted Performance

25 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in SM Energy Co are ranked lower than 25 (%) of all global equities and portfolios over the last 90 days. In spite of very unsteady primary indicators, SM Energy displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Cabot Oil and SM Energy

The main advantage of trading using opposite Cabot Oil and SM Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cabot Oil 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 Cabot Oil Gas 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.

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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.