Correlation Between Vital Energy and Vermilion Energy
Can any of the company-specific risk be diversified away by investing in both Vital Energy and Vermilion 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 Vermilion 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 Vermilion Energy, you can compare the effects of market volatilities on Vital Energy and Vermilion 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 Vermilion Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vital Energy and Vermilion Energy.
Diversification Opportunities for Vital Energy and Vermilion Energy
0.67 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Vital and Vermilion is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Vital Energy and Vermilion Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vermilion 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 Vermilion Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vermilion Energy has no effect on the direction of Vital Energy i.e., Vital Energy and Vermilion Energy go up and down completely randomly.
Pair Corralation between Vital Energy and Vermilion Energy
Given the investment horizon of 90 days Vital Energy is expected to under-perform the Vermilion Energy. In addition to that, Vital Energy is 1.23 times more volatile than Vermilion Energy. It trades about -0.03 of its total potential returns per unit of risk. Vermilion Energy is currently generating about -0.02 per unit of volatility. If you would invest 1,062 in Vermilion Energy on November 9, 2024 and sell it today you would lose (160.00) from holding Vermilion Energy or give up 15.07% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Vital Energy vs. Vermilion Energy
Performance |
| Timeline |
| Vital Energy |
| Vermilion Energy |
Vital Energy and Vermilion Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vital Energy and Vermilion Energy
The main advantage of trading using opposite Vital Energy and Vermilion Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vital Energy position performs unexpectedly, Vermilion 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 Vermilion Energy will offset losses from the drop in Vermilion 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 |
| Vermilion Energy vs. Baytex Energy Corp | Vermilion Energy vs. Obsidian Energy | Vermilion Energy vs. Canadian Natural Resources | Vermilion Energy vs. Ovintiv |
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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
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