Correlation Between Civitas Resources and Ring Energy

Can any of the company-specific risk be diversified away by investing in both Civitas Resources and Ring 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 Civitas Resources and Ring Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Civitas Resources and Ring Energy, you can compare the effects of market volatilities on Civitas Resources and Ring 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 Civitas Resources with a short position of Ring Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Civitas Resources and Ring Energy.

Diversification Opportunities for Civitas Resources and Ring Energy

0.95

Correlation Coefficient

Civitas Resources  Ring Energy

Almost no diversification

The 3 months correlation between Civitas and Ring is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding Civitas Resources and Ring Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ring Energy and Civitas Resources 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 Civitas Resources are associated (or correlated) with Ring Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ring Energy has no effect on the direction of Civitas Resources i.e., Civitas Resources and Ring Energy go up and down completely randomly.

Pair Corralation between Civitas Resources and Ring Energy

Given the investment horizon of 90 days Civitas Resources is expected to under-perform the Ring Energy. But the stock apears to be less risky and, when comparing its historical volatility, Civitas Resources is 1.45 times less risky than Ring Energy. The stock trades about -0.11 of its potential returns per unit of risk. The Ring Energy is currently generating about -0.06 of returns per unit of risk over similar time horizon. If you would invest  190.00  in Ring Energy on October 10, 2024 and sell it today you would lose (48.00) from holding Ring Energy or give up 25.26% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	100.0%
Values	Daily Returns

Civitas Resources  vs.  Ring Energy

Civitas Resources

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Civitas Resources has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong basic indicators, Civitas Resources is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

Ring Energy

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ring Energy has generated negative risk-adjusted returns adding no value to investors with long positions. Despite abnormal performance in the last few months, the Stock's technical and fundamental indicators remain fairly strong which may send shares a bit higher in February 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Pair Trading with Civitas Resources and Ring Energy

The main advantage of trading using opposite Civitas Resources and Ring Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Civitas Resources position performs unexpectedly, Ring 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 Ring Energy will offset losses from the drop in Ring Energy's long position.

The idea behind Civitas Resources and Ring 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.

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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 Stocks Directory module to find actively traded stocks across global markets.