Correlation Between San Juan and Vital Energy

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

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

Diversification Opportunities for San Juan and Vital Energy

0.35

Correlation Coefficient

San Juan  Vital Energy

Weak diversification

The 3 months correlation between San and Vital is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding San Juan Basin and Vital Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vital Energy and San Juan 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 San Juan Basin 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 San Juan i.e., San Juan and Vital Energy go up and down completely randomly.

Pair Corralation between San Juan and Vital Energy

Considering the 90-day investment horizon San Juan Basin is expected to generate 1.22 times more return on investment than Vital Energy. However, San Juan is 1.22 times more volatile than Vital Energy. It trades about -0.06 of its potential returns per unit of risk. Vital Energy is currently generating about -0.15 per unit of risk. If you would invest  406.00  in San Juan Basin on September 25, 2024 and sell it today you would lose (23.00) from holding San Juan Basin or give up 5.67% of portfolio value over 90 days.

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

San Juan Basin  vs.  Vital Energy

San Juan Basin

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days San Juan Basin has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable forward-looking indicators, San Juan is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Vital Energy

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Vital Energy are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather conflicting essential indicators, Vital Energy may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with San Juan and Vital Energy

The main advantage of trading using opposite San Juan and Vital Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if San Juan 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 San Juan Basin 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.