Correlation Between California Resources and Invictus Energy

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

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

Diversification Opportunities for California Resources and Invictus Energy

-0.39

Correlation Coefficient

California Resources  Invictus Energy

Very good diversification

The 3 months correlation between California and Invictus is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding California Resources Corp and Invictus Energy Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invictus Energy and California 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 California Resources Corp are associated (or correlated) with Invictus Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invictus Energy has no effect on the direction of California Resources i.e., California Resources and Invictus Energy go up and down completely randomly.

Pair Corralation between California Resources and Invictus Energy

Considering the 90-day investment horizon California Resources is expected to generate 2.0 times less return on investment than Invictus Energy. But when comparing it to its historical volatility, California Resources Corp is 3.68 times less risky than Invictus Energy. It trades about 0.03 of its potential returns per unit of risk. Invictus Energy Limited is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  11.00  in Invictus Energy Limited on October 4, 2024 and sell it today you would lose (6.90) from holding Invictus Energy Limited or give up 62.73% of portfolio value over 90 days.

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

California Resources Corp  vs.  Invictus Energy Limited

California Resources Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days California Resources Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, California Resources is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Invictus Energy

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Invictus Energy Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Invictus Energy is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with California Resources and Invictus Energy

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

The idea behind California Resources Corp and Invictus 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.

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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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.