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Correlation with Energy Commodities: How It Impacts Energy Stocks

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Part 3
Correlation with Energy Commodities: How It Impacts Energy Stocks PART 3 OF 5

The Rise in Natural Gas: Which Energy Stocks Might Match It?

Natural gas prices

On July 7, 2017, natural gas (UNG) (BOIL) August futures rose 2.3% and closed at $2.93 per million British thermal units (or MMbtu). Hot, humid summer weather forecasts could have boosted natural gas prices. However, in the week ended July 10, 2017, natural gas August futures fell 0.70%.

The Rise in Natural Gas: Which Energy Stocks Might Match It?

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Equity indexes such as the S&P 500 (SPY) and the Dow Jones Industrial Average (DIA) fell 0.10% and 0.30%, respectively, between July 3 and July 10, 2017. Energy stocks make up some portion of these equity indexes.

Natural gas–weighted stocks

Below are the natural gas–weighted stocks that tracked natural gas prices closely, based on correlations, in the week ended July 10, 2017:

  • Southwestern Energy (SWN): 92.2%
  • Chesapeake Energy (CHK): 87.3%
  • Antero Resources (AR): 87.0%
  • Range Resources (RRC): 86.1%
  • Gulfport Energy (GPOR): 66.7%

We’ve filtered natural gas–weighted stocks from the SPDR S&P Oil & Gas Exploration & Production ETF (XOP) by selecting only those that operate with a production mix of 60.0% or more in natural gas.

Natural gas–weighted stocks such as Cabot Oil & Gas (COG) and Rice Energy (RICE) had correlations of 18.0% and -22.0%, respectively, with natural gas active futures between July 3 and July 10, 2017.

In the next part of this series, we’ll analyze the correlations of these natural gas–weighted stocks with US crude oil. Crude oil can drive the sentiment across the entire energy sector.

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