Correlation Between SandRidge Energy and Ring Energy

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

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

Diversification Opportunities for SandRidge Energy and Ring Energy

0.82

Correlation Coefficient

SandRidge Energy  Ring Energy

Very poor diversification

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

Pair Corralation between SandRidge Energy and Ring Energy

Allowing for the 90-day total investment horizon SandRidge Energy is expected to generate 0.61 times more return on investment than Ring Energy. However, SandRidge Energy is 1.64 times less risky than Ring Energy. It trades about -0.06 of its potential returns per unit of risk. Ring Energy is currently generating about -0.13 per unit of risk. If you would invest  1,211  in SandRidge Energy on September 18, 2024 and sell it today you would lose (101.00) from holding SandRidge Energy or give up 8.34% of portfolio value over 90 days.

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

SandRidge Energy  vs.  Ring Energy

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.

Ring Energy

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ring Energy has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Stock's technical and fundamental indicators remain fairly strong which may send shares a bit higher in January 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Pair Trading with SandRidge Energy and Ring Energy

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

The idea behind SandRidge Energy and Ring Energy 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.