Correlation Between Vermilion Energy and ARC Resources
Can any of the company-specific risk be diversified away by investing in both Vermilion Energy and ARC Resources 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 Vermilion Energy and ARC Resources into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Vermilion Energy and ARC Resources, you can compare the effects of market volatilities on Vermilion Energy and ARC Resources 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 Vermilion Energy with a short position of ARC Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vermilion Energy and ARC Resources.
Diversification Opportunities for Vermilion Energy and ARC Resources
0.84 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Vermilion and ARC is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Vermilion Energy and ARC Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ARC Resources and Vermilion 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 Vermilion Energy are associated (or correlated) with ARC Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ARC Resources has no effect on the direction of Vermilion Energy i.e., Vermilion Energy and ARC Resources go up and down completely randomly.
Pair Corralation between Vermilion Energy and ARC Resources
Assuming the 90 days trading horizon Vermilion Energy is expected to generate 1.27 times less return on investment than ARC Resources. In addition to that, Vermilion Energy is 1.1 times more volatile than ARC Resources. It trades about 0.18 of its total potential returns per unit of risk. ARC Resources is currently generating about 0.25 per unit of volatility. If you would invest 2,371 in ARC Resources on August 25, 2024 and sell it today you would earn a total of 305.00 from holding ARC Resources or generate 12.86% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 95.65% |
| Values | Daily Returns |
Vermilion Energy vs. ARC Resources
Performance |
| Timeline |
| Vermilion Energy |
| ARC Resources |
Vermilion Energy and ARC Resources Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vermilion Energy and ARC Resources
The main advantage of trading using opposite Vermilion Energy and ARC Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vermilion Energy position performs unexpectedly, ARC Resources 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 ARC Resources will offset losses from the drop in ARC Resources' long position.| Vermilion Energy vs. Whitecap Resources | Vermilion Energy vs. ARC Resources | Vermilion Energy vs. Tourmaline Oil Corp | Vermilion Energy vs. MEG Energy Corp |
| ARC Resources vs. Tourmaline Oil Corp | ARC Resources vs. Whitecap Resources | ARC Resources vs. MEG Energy Corp | ARC Resources vs. Vermilion 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.
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