Correlation Between Texas Pacific and Civitas Resources

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

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

Diversification Opportunities for Texas Pacific and Civitas Resources

0.06

Correlation Coefficient

Texas Pacific  Civitas Resources

Significant diversification

The 3 months correlation between Texas and Civitas is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding Texas Pacific Land and Civitas Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Civitas Resources and Texas Pacific 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 Texas Pacific Land are associated (or correlated) with Civitas Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Civitas Resources has no effect on the direction of Texas Pacific i.e., Texas Pacific and Civitas Resources go up and down completely randomly.

Pair Corralation between Texas Pacific and Civitas Resources

Considering the 90-day investment horizon Texas Pacific Land is expected to generate 0.84 times more return on investment than Civitas Resources. However, Texas Pacific Land is 1.2 times less risky than Civitas Resources. It trades about 0.11 of its potential returns per unit of risk. Civitas Resources is currently generating about -0.07 per unit of risk. If you would invest  110,619  in Texas Pacific Land on December 28, 2024 and sell it today you would earn a total of  22,572  from holding Texas Pacific Land or generate 20.41% return on investment over 90 days.

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

Texas Pacific Land  vs.  Civitas Resources

Texas Pacific Land

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Texas Pacific Land are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite quite weak basic indicators, Texas Pacific disclosed solid returns over the last few months and may actually be approaching a breakup point.

Civitas Resources

Risk-Adjusted Performance

Very Weak

Over the last 90 days Civitas Resources has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in April 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Pair Trading with Texas Pacific and Civitas Resources

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

The idea behind Texas Pacific Land and Civitas Resources 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.