Correlation Between EON Resources and Vital Energy

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

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

Diversification Opportunities for EON Resources and Vital Energy

-0.41

Correlation Coefficient

EON Resources  Vital Energy

Very good diversification

The 3 months correlation between EON and Vital is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding EON Resources and Vital Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vital Energy and EON 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 EON Resources are associated (or correlated) with Vital Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vital Energy has no effect on the direction of EON Resources i.e., EON Resources and Vital Energy go up and down completely randomly.

Pair Corralation between EON Resources and Vital Energy

Given the investment horizon of 90 days EON Resources is expected to under-perform the Vital Energy. In addition to that, EON Resources is 2.58 times more volatile than Vital Energy. It trades about -0.33 of its total potential returns per unit of risk. Vital Energy is currently generating about -0.12 per unit of volatility. If you would invest  3,184  in Vital Energy on September 19, 2024 and sell it today you would lose (239.00) from holding Vital Energy or give up 7.51% of portfolio value over 90 days.

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

EON Resources  vs.  Vital Energy

EON Resources

Risk-Adjusted Performance

1 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in EON Resources are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Even with relatively unsteady basic indicators, EON Resources reported solid returns over the last few months and may actually be approaching a breakup point.

Vital Energy

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with EON Resources and Vital Energy

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

The idea behind EON Resources and Vital Energy 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.