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How Do Natural-Gas-Weighted Stocks Correlate with Natural Gas?

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What’s the correlation?

Among upstream companies that are part of the SPDR S&P Oil & Gas Exploration & Production ETF (XOP) and operate with a production mix of at least 60% natural gas (UNG) (BOIL) (UGAZ), Range Resources (RRC) had the highest positive correlation with natural gas futures over the last month. Range Resources had a correlation of about 33.7% with natural gas futures between April 23 and May 23, 2016.

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How do natural-gas-weighted stocks correlate with natural gas?

Upstream stocks Exco Resources (XCO), Gulfport Energy (GPOR), and Southwestern Energy (SWN) had correlations of 24.2%, 22.0%, and 6.3%, respectively, with natural gas futures over the last month, as shown in the above table. Antero Resources (AR) and Memorial Resource Development (MRD) had correlations of 4.8% and 1.6%, respectively, with natural gas futures in the last month.

WPX Energy (WPX) and Cabot Oil & Gas (COG) had correlations of -16.2% and -33%, respectively, with natural gas in the last month. Among XOP stocks that operate with production mixes of at least 60% natural gas, WPX Energy and Cabot Oil & Gas had the lowest one-month correlations with natural gas futures.

Natural-gas-weighted stocks with high correlations with natural gas futures have tended to move with natural gas in the past. Stocks with low correlations with natural gas were not as impacted by natural gas price movements.

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