Correlation Between SandRidge Energy and ConocoPhillips

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

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

Diversification Opportunities for SandRidge Energy and ConocoPhillips

0.74

Correlation Coefficient

SandRidge Energy  ConocoPhillips

Poor diversification

The 3 months correlation between SandRidge and ConocoPhillips is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding SandRidge Energy and ConocoPhillips in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ConocoPhillips and SandRidge 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 SandRidge Energy are associated (or correlated) with ConocoPhillips. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ConocoPhillips has no effect on the direction of SandRidge Energy i.e., SandRidge Energy and ConocoPhillips go up and down completely randomly.

Pair Corralation between SandRidge Energy and ConocoPhillips

Allowing for the 90-day total investment horizon SandRidge Energy is expected to under-perform the ConocoPhillips. In addition to that, SandRidge Energy is 1.08 times more volatile than ConocoPhillips. It trades about -0.07 of its total potential returns per unit of risk. ConocoPhillips is currently generating about -0.06 per unit of volatility. If you would invest  10,500  in ConocoPhillips on September 25, 2024 and sell it today you would lose (789.00) from holding ConocoPhillips or give up 7.51% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

SandRidge Energy  vs.  ConocoPhillips

SandRidge Energy

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SandRidge Energy has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

ConocoPhillips

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ConocoPhillips has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest conflicting performance, the Stock's basic indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

Pair Trading with SandRidge Energy and ConocoPhillips

The main advantage of trading using opposite SandRidge Energy and ConocoPhillips positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SandRidge Energy position performs unexpectedly, ConocoPhillips 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 ConocoPhillips will offset losses from the drop in ConocoPhillips' long position.

The idea behind SandRidge Energy and ConocoPhillips 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.