Correlation Between Hess and Vitesse Energy
Can any of the company-specific risk be diversified away by investing in both Hess and Vitesse 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 Hess and Vitesse Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Hess Corporation and Vitesse Energy, you can compare the effects of market volatilities on Hess and Vitesse 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 Hess with a short position of Vitesse Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hess and Vitesse Energy.
Diversification Opportunities for Hess and Vitesse Energy
0.89 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Hess and Vitesse is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Hess Corp. and Vitesse Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vitesse Energy and Hess 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 Hess Corporation are associated (or correlated) with Vitesse Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vitesse Energy has no effect on the direction of Hess i.e., Hess and Vitesse Energy go up and down completely randomly.
Pair Corralation between Hess and Vitesse Energy
Considering the 90-day investment horizon Hess is expected to generate 2.19 times less return on investment than Vitesse Energy. But when comparing it to its historical volatility, Hess Corporation is 1.3 times less risky than Vitesse Energy. It trades about 0.25 of its potential returns per unit of risk. Vitesse Energy is currently generating about 0.42 of returns per unit of risk over similar time horizon. If you would invest 2,471 in Vitesse Energy on August 28, 2024 and sell it today you would earn a total of 341.00 from holding Vitesse Energy or generate 13.8% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Hess Corp. vs. Vitesse Energy
Performance |
| Timeline |
| Hess |
| Vitesse Energy |
Hess and Vitesse Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Hess and Vitesse Energy
The main advantage of trading using opposite Hess and Vitesse Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hess position performs unexpectedly, Vitesse 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 Vitesse Energy will offset losses from the drop in Vitesse Energy's long position.The idea behind Hess Corporation and Vitesse Energy pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| Vitesse Energy vs. Devon Energy | Vitesse Energy vs. ConocoPhillips | Vitesse Energy vs. Occidental Petroleum | Vitesse Energy vs. Permian Resources |
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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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