CHK and COG’s Relationship with Energy Commodities

The natural gas–weighted stocks on our list that had the highest correlations with natural gas August futures on June 19–26 were:

• Cabot Oil & Gas (COG) at 77.4%
• Southwestern Energy (SWN)  at 31.3%

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.

The natural gas–weighted stocks that had the highest correlations with oil prices in the past five trading sessions were:

• Chesapeake Energy (CHK) at 97.5%
• Range Resources (RRC) at 37.9%

Chesapeake Energy had the highest negative correlation with natural gas prices. Cabot Oil & Gas, which had the highest positive correlation with natural gas prices, had the most negative correlation of 88.8% with US crude oil prices.

Oil prices can have a significant impact on the entire energy sector—not just on oil-weighted stocks. US crude oil prices are important in order to understand the US natural gas supply. Oil prices are often important for the energy sector’s general sentiment, which explains the divergence in the correlations among these natural gas–weighted stocks with oil and natural gas prices.