Correlation Between Civitas Resources and Melbana Energy

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

Diversification Opportunities for Civitas Resources and Melbana Energy

-0.25

Correlation Coefficient

Civitas Resources  Melbana Energy

Very good diversification

The 3 months correlation between Civitas and Melbana is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding Civitas Resources and Melbana Energy Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Melbana 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 Melbana Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Melbana Energy has no effect on the direction of Civitas Resources i.e., Civitas Resources and Melbana Energy go up and down completely randomly.

Pair Corralation between Civitas Resources and Melbana Energy

Assuming the 90 days horizon Civitas Resources is expected to generate 2.06 times more return on investment than Melbana Energy. However, Civitas Resources is 2.06 times more volatile than Melbana Energy Limited. It trades about 0.14 of its potential returns per unit of risk. Melbana Energy Limited is currently generating about 0.13 per unit of risk. If you would invest  17.00  in Civitas Resources on December 30, 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 Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Civitas Resources  vs.  Melbana Energy Limited

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 unsteady forward indicators, Civitas Resources demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Melbana Energy

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Melbana Energy Limited are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Melbana Energy reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Civitas Resources and Melbana Energy

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

The idea behind Civitas Resources and Melbana Energy Limited 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.