Correlation Between Vaalco Energy and Hess

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

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

Diversification Opportunities for Vaalco Energy and Hess

0.37

Correlation Coefficient

Vaalco Energy  Hess

Weak diversification

The 3 months correlation between Vaalco and Hess is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding Vaalco Energy and Hess Corp. in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hess 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 Hess. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hess has no effect on the direction of Vaalco Energy i.e., Vaalco Energy and Hess go up and down completely randomly.

Pair Corralation between Vaalco Energy and Hess

Considering the 90-day investment horizon Vaalco Energy is expected to under-perform the Hess. In addition to that, Vaalco Energy is 1.8 times more volatile than Hess Corporation. It trades about -0.06 of its total potential returns per unit of risk. Hess Corporation is currently generating about 0.01 per unit of volatility. If you would invest  14,251  in Hess Corporation on October 13, 2024 and sell it today you would lose (10.00) from holding Hess Corporation or give up 0.07% of portfolio value over 90 days.

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

Vaalco Energy  vs.  Hess 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 unfluctuating performance in the last few months, the Stock's technical and fundamental indicators remain fairly strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Hess

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Hess Corporation are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable technical and fundamental indicators, Hess is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Vaalco Energy and Hess

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

The idea behind Vaalco Energy and Hess 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.