Encana’s correlations last week
As we saw in the previous part, Encana’s (ECA) stock price fell ~5% last week. Crude oil (USO) (SCO) and natural gas (UNG) (BOIL) each fell ~5% in the same week. However, the SPDR S&P 500 ETF (SPY) rose 1.3%. Encana’s stock price was under pressure due to falling crude oil and natural gas prices. In this part, we’ll quantify the relationship between Encana’s stock price and crude oil prices. We’ll study the stock’s correlation coefficient with crude oil in the past week and the past month. We’ll also look at the extent to which Encana’s stock price followed natural gas prices and the S&P 500 Index during these two periods.
Compared to crude oil, the stock’s correlations with natural gas (UNG) was lower at ~52%. The movements in natural gas had a lower influence on Encana stock last week.
The stock’s correlation with the SPDR S&P 500 ETF (SPY) was approximately -79%. The daily movements in the S&P 500 Index didn’t influence Encana’s stock price.
Encana’s peer Murphy Oil (MUR) showed a correlation of ~84% with crude oil prices last week and fell ~2% due to lower crude prices. Murphy Oil showed a higher correlation of ~93% with natural gas prices last week. Murphy Oil’s production mix contains ~60% liquids (crude oil and natural gas liquids). As a result, Murphy Oil usually has a high correlation with crude oil prices. Last week, Murphy Oil showed a negative correlation of approximately -40% with the SPDR S&P 500 ETF’s (SPY) prices.
To learn more about the correlation of various upstream stocks with various energy commodities, read Why Rise in Oil Could Be Necessary for Energy Stock Momentum.