Correlation Between Vaalco Energy and EQT

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

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

Diversification Opportunities for Vaalco Energy and EQT

-0.7

Correlation Coefficient

Vaalco Energy  EQT

Excellent diversification

The 3 months correlation between Vaalco and EQT is -0.7. Overlapping area represents the amount of risk that can be diversified away by holding Vaalco Energy and EQT Corp. in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EQT Corporation and Vaalco Energy 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 Vaalco Energy are associated (or correlated) with EQT. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EQT Corporation has no effect on the direction of Vaalco Energy i.e., Vaalco Energy and EQT go up and down completely randomly.

Pair Corralation between Vaalco Energy and EQT

Considering the 90-day investment horizon Vaalco Energy is expected to under-perform the EQT. In addition to that, Vaalco Energy is 1.3 times more volatile than EQT Corporation. It trades about -0.37 of its total potential returns per unit of risk. EQT Corporation is currently generating about -0.15 per unit of volatility. If you would invest  4,599  in EQT Corporation on September 24, 2024 and sell it today you would lose (265.00) from holding EQT Corporation or give up 5.76% of portfolio value over 90 days.

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

Vaalco Energy  vs.  EQT Corp.

Vaalco Energy

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Vaalco Energy has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of conflicting performance in the last few months, the Stock's technical and fundamental indicators remain fairly strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

EQT Corporation

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in EQT Corporation are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating basic indicators, EQT unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Vaalco Energy and EQT

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

The idea behind Vaalco Energy and EQT Corporation 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.