Correlation Between Vaalco Energy and Earthstone Energy
Can any of the company-specific risk be diversified away by investing in both Vaalco Energy and Earthstone 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 Vaalco Energy and Earthstone Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Vaalco Energy and Earthstone Energy, you can compare the effects of market volatilities on Vaalco Energy and Earthstone 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 Vaalco Energy with a short position of Earthstone Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vaalco Energy and Earthstone Energy.
Diversification Opportunities for Vaalco Energy and Earthstone Energy
-0.4 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Vaalco and Earthstone is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding Vaalco Energy and Earthstone Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Earthstone Energy and Vaalco Energy 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 Vaalco Energy are associated (or correlated) with Earthstone Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Earthstone Energy has no effect on the direction of Vaalco Energy i.e., Vaalco Energy and Earthstone Energy go up and down completely randomly.
Pair Corralation between Vaalco Energy and Earthstone Energy
Considering the 90-day investment horizon Vaalco Energy is expected to generate 1.06 times less return on investment than Earthstone Energy. But when comparing it to its historical volatility, Vaalco Energy is 1.02 times less risky than Earthstone Energy. It trades about 0.03 of its potential returns per unit of risk. Earthstone Energy is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 1,449 in Earthstone Energy on August 24, 2024 and sell it today you would earn a total of 83.00 from holding Earthstone Energy or generate 5.73% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 32.12% |
| Values | Daily Returns |
Vaalco Energy vs. Earthstone Energy
Performance |
| Timeline |
| Vaalco Energy |
| Earthstone Energy |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Vaalco Energy and Earthstone Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vaalco Energy and Earthstone Energy
The main advantage of trading using opposite Vaalco Energy and Earthstone Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vaalco Energy position performs unexpectedly, Earthstone 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 Earthstone Energy will offset losses from the drop in Earthstone Energy's long position.| Vaalco Energy vs. Epsilon Energy | Vaalco Energy vs. PHX Minerals | Vaalco Energy vs. Northern Oil Gas | Vaalco Energy vs. Gran Tierra Energy |
| Earthstone Energy vs. Vital Energy | Earthstone Energy vs. Comstock Resources | Earthstone Energy vs. Magnolia Oil Gas | Earthstone 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
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