Correlation Between California Resources and Vital Energy
Can any of the company-specific risk be diversified away by investing in both California Resources and Vital Energy at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining California Resources and Vital Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between California Resources Corp and Vital Energy, you can compare the effects of market volatilities on California Resources and Vital Energy and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in California Resources with a short position of Vital Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of California Resources and Vital Energy.
Diversification Opportunities for California Resources and Vital Energy
0.29 | Correlation Coefficient |
Modest diversification
The 3 months correlation between California and Vital is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding California Resources Corp and Vital Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vital Energy and California Resources is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on California Resources Corp are associated (or correlated) with Vital Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vital Energy has no effect on the direction of California Resources i.e., California Resources and Vital Energy go up and down completely randomly.
Pair Corralation between California Resources and Vital Energy
Considering the 90-day investment horizon California Resources is expected to generate 1.88 times less return on investment than Vital Energy. But when comparing it to its historical volatility, California Resources Corp is 1.38 times less risky than Vital Energy. It trades about 0.25 of its potential returns per unit of risk. Vital Energy is currently generating about 0.34 of returns per unit of risk over similar time horizon. If you would invest 2,671 in Vital Energy on August 28, 2024 and sell it today you would earn a total of 567.00 from holding Vital Energy or generate 21.23% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
California Resources Corp vs. Vital Energy
Performance |
| Timeline |
| California Resources Corp |
| Vital Energy |
California Resources and Vital Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with California Resources and Vital Energy
The main advantage of trading using opposite California Resources and Vital Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if California Resources position performs unexpectedly, Vital Energy can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Vital Energy will offset losses from the drop in Vital Energy's long position.| California Resources vs. Berry Petroleum Corp | California Resources vs. Magnolia Oil Gas | California Resources vs. Comstock Resources | California Resources vs. Gulfport Energy Operating |
| Vital Energy vs. SM Energy Co | Vital Energy vs. Permian Resources | Vital Energy vs. Matador Resources | Vital Energy vs. Obsidian Energy |
Check out your portfolio center.Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.
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