Correlation Between Vital Energy and SandRidge Energy
Can any of the company-specific risk be diversified away by investing in both Vital Energy and SandRidge 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 Vital Energy and SandRidge Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Vital Energy and SandRidge Energy, you can compare the effects of market volatilities on Vital Energy and SandRidge 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 Vital Energy with a short position of SandRidge Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vital Energy and SandRidge Energy.
Diversification Opportunities for Vital Energy and SandRidge Energy
0.79 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Vital and SandRidge is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Vital Energy and SandRidge Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SandRidge Energy and Vital 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 Vital Energy are associated (or correlated) with SandRidge Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SandRidge Energy has no effect on the direction of Vital Energy i.e., Vital Energy and SandRidge Energy go up and down completely randomly.
Pair Corralation between Vital Energy and SandRidge Energy
Given the investment horizon of 90 days Vital Energy is expected to generate 1.42 times more return on investment than SandRidge Energy. However, Vital Energy is 1.42 times more volatile than SandRidge Energy. It trades about 0.34 of its potential returns per unit of risk. SandRidge Energy is currently generating about 0.18 per unit of risk. 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 | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Vital Energy vs. SandRidge Energy
Performance |
| Timeline |
| Vital Energy |
| SandRidge Energy |
Vital Energy and SandRidge Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vital Energy and SandRidge Energy
The main advantage of trading using opposite Vital Energy and SandRidge Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vital Energy position performs unexpectedly, SandRidge 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 SandRidge Energy will offset losses from the drop in SandRidge Energy's long position.| Vital Energy vs. SM Energy Co | Vital Energy vs. Permian Resources | Vital Energy vs. Matador Resources | Vital Energy vs. Obsidian Energy |
| SandRidge Energy vs. Range Resources Corp | SandRidge Energy vs. SM Energy Co | SandRidge Energy vs. Northern Oil Gas |
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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.
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