Correlation Between SandRidge Mississippian and San Juan

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

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

Diversification Opportunities for SandRidge Mississippian and San Juan

-0.45

Correlation Coefficient

SandRidge Mississippian  San Juan

Very good diversification

The 3 months correlation between SandRidge and San is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding SandRidge Mississippian Trust and San Juan Basin in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on San Juan Basin and SandRidge Mississippian 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 Mississippian Trust are associated (or correlated) with San Juan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of San Juan Basin has no effect on the direction of SandRidge Mississippian i.e., SandRidge Mississippian and San Juan go up and down completely randomly.

Pair Corralation between SandRidge Mississippian and San Juan

Assuming the 90 days horizon SandRidge Mississippian Trust is expected to generate 2.82 times more return on investment than San Juan. However, SandRidge Mississippian is 2.82 times more volatile than San Juan Basin. It trades about -0.01 of its potential returns per unit of risk. San Juan Basin is currently generating about -0.04 per unit of risk. If you would invest  10.00  in SandRidge Mississippian Trust on September 26, 2024 and sell it today you would lose (3.50) from holding SandRidge Mississippian Trust or give up 35.0% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	27.82%
Values	Daily Returns

SandRidge Mississippian Trust  vs.  San Juan Basin

SandRidge Mississippian

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SandRidge Mississippian Trust has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, SandRidge Mississippian is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

San Juan Basin

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in San Juan Basin are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable forward-looking indicators, San Juan is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with SandRidge Mississippian and San Juan

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

The idea behind SandRidge Mississippian Trust and San Juan Basin 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.