Correlation Between SM Energy and Uranium Energy

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

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

Diversification Opportunities for SM Energy and Uranium Energy

-0.49

Correlation Coefficient

SM Energy  Uranium Energy

Very good diversification

The 3 months correlation between SM Energy and Uranium is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding SM Energy Co and Uranium Energy Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Uranium Energy 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 Co are associated (or correlated) with Uranium Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Uranium Energy Corp has no effect on the direction of SM Energy i.e., SM Energy and Uranium Energy go up and down completely randomly.

Pair Corralation between SM Energy and Uranium Energy

Allowing for the 90-day total investment horizon SM Energy Co is expected to generate 0.48 times more return on investment than Uranium Energy. However, SM Energy Co is 2.07 times less risky than Uranium Energy. It trades about 0.04 of its potential returns per unit of risk. Uranium Energy Corp is currently generating about -0.03 per unit of risk. If you would invest  5,040  in SM Energy Co on January 29, 2024 and sell it today you would earn a total of  44.00  from holding SM Energy Co or generate 0.87% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

SM Energy Co  vs.  Uranium Energy Corp

SM Energy

Risk-Adjusted Performance

23 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in SM Energy Co are ranked lower than 23 (%) of all global equities and portfolios over the last 90 days. In spite of very unsteady primary indicators, SM Energy displayed solid returns over the last few months and may actually be approaching a breakup point.

Uranium Energy Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Uranium Energy Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Uranium Energy is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with SM Energy and Uranium Energy

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

The idea behind SM Energy Co and Uranium Energy 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.

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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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.