Correlation Between Civitas Resources and PetroShale

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

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

Diversification Opportunities for Civitas Resources and PetroShale

-0.36

Correlation Coefficient

Civitas Resources  PetroShale

Very good diversification

The 3 months correlation between Civitas and PetroShale is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding Civitas Resources and PetroShale in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PetroShale 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 PetroShale. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PetroShale has no effect on the direction of Civitas Resources i.e., Civitas Resources and PetroShale go up and down completely randomly.

Pair Corralation between Civitas Resources and PetroShale

Assuming the 90 days horizon Civitas Resources is expected to generate 28.05 times more return on investment than PetroShale. However, Civitas Resources is 28.05 times more volatile than PetroShale. It trades about 0.12 of its potential returns per unit of risk. PetroShale is currently generating about -0.2 per unit of risk. If you would invest  3.40  in Civitas Resources on September 4, 2024 and sell it today you would earn a total of  13.60  from holding Civitas Resources or generate 400.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

Civitas Resources  vs.  PetroShale

Civitas Resources

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Civitas Resources are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak forward indicators, Civitas Resources demonstrated solid returns over the last few months and may actually be approaching a breakup point.

PetroShale

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days PetroShale has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's forward indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Civitas Resources and PetroShale

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

The idea behind Civitas Resources and PetroShale 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.