Correlation Between Zegona Communications and SM Energy

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

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

Diversification Opportunities for Zegona Communications and SM Energy

0.03

Correlation Coefficient

Zegona Communications  SM Energy

Significant diversification

The 3 months correlation between Zegona and 0KZA is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding Zegona Communications Plc and SM Energy Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SM Energy and Zegona Communications 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 Zegona Communications Plc 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 Zegona Communications i.e., Zegona Communications and SM Energy go up and down completely randomly.

Pair Corralation between Zegona Communications and SM Energy

Assuming the 90 days trading horizon Zegona Communications Plc is expected to generate 0.99 times more return on investment than SM Energy. However, Zegona Communications Plc is 1.01 times less risky than SM Energy. It trades about -0.12 of its potential returns per unit of risk. SM Energy Co is currently generating about -0.13 per unit of risk. If you would invest  35,600  in Zegona Communications Plc on September 21, 2024 and sell it today you would lose (4,200) from holding Zegona Communications Plc or give up 11.8% of portfolio value over 90 days.

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

Zegona Communications Plc  vs.  SM Energy Co

Zegona Communications Plc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Zegona Communications Plc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

SM Energy

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SM Energy Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Zegona Communications and SM Energy

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

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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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..