Correlation Between Civitas Resources and Vermilion Energy

Can any of the company-specific risk be diversified away by investing in both Civitas Resources 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 Civitas Resources and Vermilion 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 Vermilion Energy, you can compare the effects of market volatilities on Civitas Resources 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 Civitas Resources with a short position of Vermilion Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Civitas Resources and Vermilion Energy.

Diversification Opportunities for Civitas Resources and Vermilion Energy

0.82

Correlation Coefficient

Civitas Resources  Vermilion Energy

Very poor diversification

The 3 months correlation between Civitas and Vermilion is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Civitas Resources and Vermilion Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vermilion 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 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 Civitas Resources i.e., Civitas Resources and Vermilion Energy go up and down completely randomly.

Pair Corralation between Civitas Resources and Vermilion Energy

Given the investment horizon of 90 days Civitas Resources is expected to generate 0.96 times more return on investment than Vermilion Energy. However, Civitas Resources is 1.04 times less risky than Vermilion Energy. It trades about 0.05 of its potential returns per unit of risk. Vermilion Energy is currently generating about 0.03 per unit of risk. If you would invest  4,876  in Civitas Resources on October 27, 2024 and sell it today you would earn a total of  241.00  from holding Civitas Resources or generate 4.94% return on investment over 90 days.

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

Civitas Resources  vs.  Vermilion Energy

Civitas Resources

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Civitas Resources are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak basic indicators, Civitas Resources may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Vermilion Energy

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Vermilion Energy are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable technical and fundamental indicators, Vermilion Energy is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Civitas Resources and Vermilion Energy

The main advantage of trading using opposite Civitas Resources and Vermilion Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Civitas Resources 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.

The idea behind Civitas Resources and Vermilion 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.

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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.