Oil-Related Sentiments Are Driving Natural Gas–Weighted Stocks
Natural Gas: Analyzing Quantitative Insights for Investors
Oil-related sentiments could weigh on natural gas–weighted stocks
Stocks with a production mix of at least 80% in natural gas (UNG)(UGAZ)(BOIL)(GASL) had a stronger correlation to crude oil (UCO)(USO) than natural gas in the past month and three months. EXCO Resources (XCO) operates with a production mix of 88.7% in natural gas. In the last three months, its moves correlated 45.1% with crude oil and 13.5% with natural gas. Also, the last one-month correlation analysis for EXCO Resources points to the fact that it correlates more with crude oil than natural gas.
Rice Energy (RICE) operates with a 99.3% production mix in natural gas. In the last three months, its moves correlated 48.8% with crude oil and 29.7% with natural gas. The last one-month correlation analysis also shows the same trend for Rice Energy. Southwestern Energy Company (SWN) and Antero Resources (AR) also exhibit the same trend in both the one-month and three-month correlation analysis.
This illustrates the Market’s sentiment toward the fall in crude oil prices. Investors turn bearish even toward stocks with a high production mix of natural gas if crude oil prices fall.
Cabot Oil & Gas (COG) had a significantly higher correlation to natural gas than crude oil between February 2, 2016, and May 2, 2016. Cabot Oil & Gas has a production mix of 93% in natural gas. However, in the past month, Cabot Oil & Gas was correlated more with crude oil than with natural gas. This indicates that a recovery in natural gas prices alone may not be enough to push these stocks higher. Support will likely be needed from crude oil prices.
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