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Which Natural Gas–Weighted Stocks Are Aligned with Oil Prices?

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Nov. 20 2020, Updated 12:26 p.m. ET

Natural gas–weighted stocks

The natural gas–weighted stocks under review that might be inversely related to US crude oil February futures’ movements based on their correlations in the last five trading sessions are:

  • Range Resources (RRC) at -75.3%
  • Cabot Oil & Gas (COG) at -34.9%
  • Southwestern Energy (SWN) at -24.6%

These three natural gas–weighted stocks had positive correlations with natural gas prices, which we discussed in the previous part.

On our list of natural gas–weighted stocks, Gulfport Energy (GPOR) and Chesapeake Energy (CHK) had correlations of 89.5% and 72.4%, respectively, with US crude oil prices—the highest on our list. Gulfport Energy and Chesapeake Energy were the only natural gas–weighted stocks that had negative correlations with natural gas futures during this period.

The natural gas–weighted stocks mentioned above are part of the SPDR S&P Oil & Gas Exploration & Production ETF (XOP). They operate with production mixes of at least 60.0% in natural gas.

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Oil’s role

US crude oil prices are important in order to understand US natural gas supplies. Oil prices are often important for the energy sector’s general sentiment. We saw a divergence trend in the correlations of these natural gas–weighted stocks with oil and natural gas prices. Next, we’ll analyze natural gas–weighted stocks’ returns and see how their correlations with crude oil and natural gas might have driven their returns.

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