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Natural Gas–Weighted Portfolio: A Look into Correlations

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Aug. 2 2016, Published 6:49 a.m. ET

What’s the correlation?

In this part of the series, we’ll continue looking at upstream companies that are part of the SPDR S&P Oil & Gas Exploration & Production ETF (XOP). We’ll look at upstream companies that operate with a production mix of at least 60% in natural gas (UNG) (BOIL) (UGAZ) (GASX) (GASL) (FCG).

The following upstream companies had the greatest correlation to natural gas futures between July 1 and August 1, 2016:

  • Rice Energy (RICE) – 66.3%
  • Southwestern Energy (SWN) – 63.1%
  • EQT (EQT) – 58.3%
  • Range Resources (RRC) – 55.9%
  • Memorial Resource Development (MRD) – 52.5%
  • WPX Energy (WPX) – 52.2%
  • Cabot Oil & Gas (COG) – 40.4%

The following natural gas–weighted stocks correlated the least with natural gas futures over this period:

  • Antero Resources (AR) – 19.6%
  • Contango Oil & Gas (MCF) at -10.6%

Natural gas–weighted stocks with high correlations to natural gas futures moved with natural gas. On the other hand, stocks with low correlations weren’t impacted as much by natural gas price movements.

In the next part of this series, we’ll see how natural gas–weighted stocks performed compared to natural gas.

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