Correlation Between Hess and Vaalco Energy
Can any of the company-specific risk be diversified away by investing in both Hess and Vaalco 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 Hess and Vaalco Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Hess Corporation and Vaalco Energy, you can compare the effects of market volatilities on Hess and Vaalco 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 Hess with a short position of Vaalco Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hess and Vaalco Energy.
Diversification Opportunities for Hess and Vaalco Energy
0.37 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Hess and Vaalco is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding Hess Corp. and Vaalco Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vaalco Energy and Hess 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 Hess Corporation are associated (or correlated) with Vaalco Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vaalco Energy has no effect on the direction of Hess i.e., Hess and Vaalco Energy go up and down completely randomly.
Pair Corralation between Hess and Vaalco Energy
Considering the 90-day investment horizon Hess Corporation is expected to generate 0.55 times more return on investment than Vaalco Energy. However, Hess Corporation is 1.8 times less risky than Vaalco Energy. It trades about 0.01 of its potential returns per unit of risk. Vaalco Energy is currently generating about -0.06 per unit of risk. 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 |
Hess Corp. vs. Vaalco Energy
Performance |
Timeline |
Hess |
Vaalco Energy |
Hess and Vaalco Energy Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Hess and Vaalco Energy
The main advantage of trading using opposite Hess and Vaalco Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hess position performs unexpectedly, Vaalco 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 Vaalco Energy will offset losses from the drop in Vaalco Energy's long position.The idea behind Hess Corporation and Vaalco 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.Vaalco Energy vs. Epsilon Energy | Vaalco Energy vs. PHX Minerals | Vaalco Energy vs. Northern Oil Gas | Vaalco Energy vs. Gran Tierra Energy |
Check out your portfolio center.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 Commodity Directory module to find actively traded commodities issued by global exchanges.
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