Correlation Between Mesa Royalty and Vista Oil

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

By analyzing existing cross correlation between Mesa Royalty Trust and Vista Oil Gas, you can compare the effects of market volatilities on Mesa Royalty and Vista Oil 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 Mesa Royalty with a short position of Vista Oil. Check out your portfolio center. Please also check ongoing floating volatility patterns of Mesa Royalty and Vista Oil.

Diversification Opportunities for Mesa Royalty and Vista Oil

0.49

Correlation Coefficient

Mesa Royalty  Vista Oil

Very weak diversification

The 3 months correlation between Mesa and Vista is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding Mesa Royalty Trust and Vista Oil Gas in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vista Oil Gas and Mesa Royalty 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 Mesa Royalty Trust are associated (or correlated) with Vista Oil. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vista Oil Gas has no effect on the direction of Mesa Royalty i.e., Mesa Royalty and Vista Oil go up and down completely randomly.

Pair Corralation between Mesa Royalty and Vista Oil

Considering the 90-day investment horizon Mesa Royalty Trust is expected to under-perform the Vista Oil. In addition to that, Mesa Royalty is 1.33 times more volatile than Vista Oil Gas. It trades about -0.04 of its total potential returns per unit of risk. Vista Oil Gas is currently generating about 0.1 per unit of volatility. If you would invest  1,668  in Vista Oil Gas on October 13, 2024 and sell it today you would earn a total of  4,117  from holding Vista Oil Gas or generate 246.82% return on investment over 90 days.

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

Mesa Royalty Trust  vs.  Vista Oil Gas

Mesa Royalty Trust

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Mesa Royalty Trust are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Mesa Royalty may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Vista Oil Gas

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Vista Oil Gas are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, Vista Oil unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Mesa Royalty and Vista Oil

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

The idea behind Mesa Royalty Trust and Vista Oil Gas 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.