Correlation Between Sm Energy and Exxon

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

Diversification Opportunities for Sm Energy and Exxon

0.8
  Correlation Coefficient

Very poor diversification

The 3 months correlation between Sm Energy and Exxon is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Sm Energy and Exxon Mobil Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Exxon Mobil Corp and Sm 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 Sm Energy are associated (or correlated) with Exxon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Exxon Mobil Corp has no effect on the direction of Sm Energy i.e., Sm Energy and Exxon go up and down completely randomly.

Pair Corralation between Sm Energy and Exxon

Allowing for the 90-day total investment horizon Sm Energy is expected to under-perform the Exxon. In addition to that, Sm Energy is 1.42 times more volatile than Exxon Mobil Corp. It trades about -0.34 of its total potential returns per unit of risk. Exxon Mobil Corp is currently generating about -0.14 per unit of volatility. If you would invest  9,767  in Exxon Mobil Corp on April 3, 2022 and sell it today you would lose (1,012)  from holding Exxon Mobil Corp or give up 10.36% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthStrong
Accuracy100.0%
ValuesDaily Returns

Sm Energy  vs.  Exxon Mobil Corp

 Performance (%) 
      Timeline 
Sm Energy 
Sm Energy Performance
0 of 100
Over the last 90 days Sm Energy has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest sluggish performance, the Stock's primary indicators remain steady and the new chaos on Wall Street may also be a sign of medium-term gains for the company stakeholders.

Structure and Payout Changes

Forward Annual Dividend Yield
6.0E-4
Payout Ratio
0.0052
Last Split Factor
2:1
Forward Annual Dividend Rate
0.02
Dividend Date
2022-05-06
Ex Dividend Date
2022-04-21
Last Split Date
2005-04-01

Sm Energy Price Channel

Exxon Mobil Corp 
Exxon Performance
3 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Exxon Mobil Corp are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Exxon may actually be approaching a critical reversion point that can send shares even higher in August 2022.

Structure and Payout Changes

Forward Annual Dividend Yield
0.0411
Payout Ratio
0.52
Last Split Factor
2:1
Forward Annual Dividend Rate
3.52
Dividend Date
2022-06-10
Ex Dividend Date
2022-05-12
Last Split Date
2001-07-19

Exxon Price Channel

Sm Energy and Exxon Volatility Contrast

 Predicted Return Density 
      Returns 

Pair Trading with Sm Energy and Exxon

The main advantage of trading using opposite Sm Energy and Exxon positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sm Energy position performs unexpectedly, Exxon 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 Exxon will offset losses from the drop in Exxon's long position.
The idea behind Sm Energy and Exxon Mobil Corp 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.

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