Correlation Between Permian Resources and Vista Oil

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

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

Diversification Opportunities for Permian Resources and Vista Oil

0.79

Correlation Coefficient

Permian Resources  Vista Oil

Poor diversification

The 3 months correlation between Permian and Vista is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Permian Resources 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 Permian 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 Permian Resources 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 Permian Resources i.e., Permian Resources and Vista Oil go up and down completely randomly.

Pair Corralation between Permian Resources and Vista Oil

Allowing for the 90-day total investment horizon Permian Resources is expected to generate 0.73 times more return on investment than Vista Oil. However, Permian Resources is 1.36 times less risky than Vista Oil. It trades about 0.04 of its potential returns per unit of risk. Vista Oil Gas is currently generating about -0.04 per unit of risk. If you would invest  1,372  in Permian Resources on December 26, 2024 and sell it today you would earn a total of  53.00  from holding Permian Resources or generate 3.86% return on investment over 90 days.

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

Permian Resources  vs.  Vista Oil Gas

Permian Resources

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Permian Resources are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable basic indicators, Permian Resources is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Vista Oil Gas

Risk-Adjusted Performance

Very Weak

Over the last 90 days Vista Oil Gas has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Permian Resources and Vista Oil

The main advantage of trading using opposite Permian Resources and Vista Oil positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Permian Resources 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 Permian Resources 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.