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How Correlations with Energy Commodities Impact Upstream Stocks

PART:
1 2 3 4 5
Part 3
How Correlations with Energy Commodities Impact Upstream Stocks PART 3 OF 5

The Struggling Natural Gas Sector and Gas-Weighted Stocks

Natural gas

On September 11, 2017, natural gas (UNG) (BOIL) October futures closed at $2.95 per MMBtu (million British thermal units). It was 2.1% above the previous day’s closing price, but 1.7% below the psychologically important level of $3.00. As the bearish sentiment due to Hurricane Irma eased, it could have helped natural gas prices move higher.

Between September 1 and September 11, 2017, US natural gas October futures fell 3.9%. During this period, the S&P 500 Index (SPY) and the Dow Jones Industrial Average Index (DIA) rose 0.5% and 0.3%, respectively.

The Struggling Natural Gas Sector and Gas-Weighted Stocks

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US crude oil October futures rose 1.6% during this period. The S&P 500 Index (SPY) and the Dow Jones Industrial Average Index have some allocations to stocks of oil and gas–producing companies.

Natural gas–weighted stocks

Our collection of natural gas–weighted stocks include upstream stocks from the SPDR S&P Oil & Gas Exploration & Production ETF (XOP) that have a minimum 60% production mix in natural gas.

Below are the natural gas–weighted stocks that had the highest correlations with natural gas prices in the past five trading sessions:

  • Southwestern Energy (SWN): 86.9%
  • Gulfport Energy (GPOR): 58.3%
  • EQT Corp. (EQT): 57.2%
  • Range Resources (RRC): 55.8%
  • Antero Resources (AR): 54.8%

Natural gas–weighted stocks that had the lowest correlations with natural gas prices during this period follow:

  • Chesapeake Energy (CHK): 48.7%
  • Cabot Oil & Gas (COG): 24.6%

In the next part, we’ll analyze the correlations of these natural gas-weighted stocks with US crude oil active futures.

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