Natural gas–weighted stocks

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

  • Antero Resources (AR) at -88.6%
  • Southwestern Energy (SWN) at -81.5%
  • Cabot Oil & Gas (COG) at -78.3%

Natural Gas–Weighted Stocks Might Be Diverging from Oil Prices

Antero Resources and Southwestern Energy had the highest positive correlations with natural gas prices, which we discussed in the previous part.

On our list of natural gas–weighted stocks, only Chesapeake Energy (CHK) had a positive correlation of 51.5% with US crude oil prices. Chesapeake Energy was the only natural gas–weighted stock that had a negative correlation 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.

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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