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Correlation Impacted Natural Gas–Weighted Stocks’ Returns

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Jun. 27 2019, Published 10:05 a.m. ET

Natural gas–weighted stocks’ returns

On June 19–26, our list of natural gas–weighted stocks fell 1.2%, while natural gas active futures rose 0.2%. On average, natural gas–weighted stocks underperformed natural gas futures during this period. These natural gas–weighted stocks 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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Outperformers

The following natural gas–weighted stocks rose the most in the trailing week:

  • Chesapeake Energy (CHK) rose 4.4%.
  • Range Resources (RRC) rose 1.6%.

Chesapeake Energy and Range Resources were among the stocks that had the highest correlation with US crude oil prices. On June 19–26, US crude oil active futures rose 10%. The shift in Chesapeake Energy’s production mix is another factor behind the higher association with oil prices. On June 14, BMO reduced its target price on Range Resources by $2 to $6.

Underperformers

The following natural gas–weighted stocks were the underperformers in the trailing week:

  • Cabot Oil & Gas (COG) fell 6%.
  • Southwestern Energy (SWN) fell 4.4%.
  • Antero Resources (AR) fell 1.8%.

For Cabot Oil & Gas, the stock prices’ divergent correlation with oil and natural gas prices might be behind the decline. Cabot Oil & Gas operates with a production mix of 100% in natural gas.

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