Correlation Between Civitas Resources and MEG Energy

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

Diversification Opportunities for Civitas Resources and MEG Energy

0.15

Correlation Coefficient

Civitas Resources  MEG Energy

Average diversification

The 3 months correlation between Civitas and MEG is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding Civitas Resources and MEG Energy Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MEG Energy Corp 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 MEG Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MEG Energy Corp has no effect on the direction of Civitas Resources i.e., Civitas Resources and MEG Energy go up and down completely randomly.

Pair Corralation between Civitas Resources and MEG Energy

Assuming the 90 days horizon Civitas Resources is expected to generate 15.61 times more return on investment than MEG Energy. However, Civitas Resources is 15.61 times more volatile than MEG Energy Corp. It trades about 0.14 of its potential returns per unit of risk. MEG Energy Corp is currently generating about 0.07 per unit of risk. If you would invest  17.00  in Civitas Resources on December 28, 2024 and sell it today you would lose (14.00) from holding Civitas Resources or give up 82.35% of portfolio value over 90 days.

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

Civitas Resources  vs.  MEG Energy Corp

Civitas Resources

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Civitas Resources are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite fairly uncertain forward indicators, Civitas Resources demonstrated solid returns over the last few months and may actually be approaching a breakup point.

MEG Energy Corp

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in MEG Energy Corp are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile technical and fundamental indicators, MEG Energy may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Civitas Resources and MEG Energy

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

The idea behind Civitas Resources and MEG Energy Corp 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.