Correlation Between Ovintiv and Vital Energy

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

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

Diversification Opportunities for Ovintiv and Vital Energy

0.61

Correlation Coefficient

Ovintiv  Vital Energy

Poor diversification

The 3 months correlation between Ovintiv and Vital is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Ovintiv and Vital Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vital Energy and Ovintiv 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 Ovintiv 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 Ovintiv i.e., Ovintiv and Vital Energy go up and down completely randomly.

Pair Corralation between Ovintiv and Vital Energy

Considering the 90-day investment horizon Ovintiv is expected to generate 0.7 times more return on investment than Vital Energy. However, Ovintiv is 1.44 times less risky than Vital Energy. It trades about 0.06 of its potential returns per unit of risk. Vital Energy is currently generating about -0.12 per unit of risk. If you would invest  3,948  in Ovintiv on December 29, 2024 and sell it today you would earn a total of  274.00  from holding Ovintiv or generate 6.94% return on investment over 90 days.

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

Ovintiv  vs.  Vital Energy

Ovintiv

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Ovintiv are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile basic indicators, Ovintiv may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Vital Energy

Risk-Adjusted Performance

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 unsteady performance in the last few months, the Stock's essential indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Ovintiv and Vital Energy

The main advantage of trading using opposite Ovintiv and Vital Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ovintiv 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 Ovintiv 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.