Correlation Between New Frontier and Vital Energy

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

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

Diversification Opportunities for New Frontier and Vital Energy

0.0

Correlation Coefficient

New Frontier  Vital Energy

Pay attention - limited upside

The 3 months correlation between New and Vital is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding New Frontier Energy and Vital Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vital Energy and New Frontier 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 New Frontier Energy 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 New Frontier i.e., New Frontier and Vital Energy go up and down completely randomly.

Pair Corralation between New Frontier and Vital Energy

Given the investment horizon of 90 days New Frontier Energy is expected to under-perform the Vital Energy. In addition to that, New Frontier is 2.43 times more volatile than Vital Energy. It trades about -0.05 of its total potential returns per unit of risk. Vital Energy is currently generating about -0.02 per unit of volatility. If you would invest  5,164  in Vital Energy on October 26, 2024 and sell it today you would lose (1,770) from holding Vital Energy or give up 34.28% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	99.4%
Values	Daily Returns

New Frontier Energy  vs.  Vital Energy

New Frontier Energy

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days New Frontier Energy has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong technical and fundamental indicators, New Frontier is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

Vital Energy

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Vital Energy are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating essential indicators, Vital Energy exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with New Frontier and Vital Energy

The main advantage of trading using opposite New Frontier and Vital Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if New Frontier 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 New Frontier Energy 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.

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 Transaction History module to view history of all your transactions and understand their impact on performance.