Correlation Between Vermilion Energy and Tourmaline Oil

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

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

Diversification Opportunities for Vermilion Energy and Tourmaline Oil

0.37

Correlation Coefficient

Vermilion Energy  Tourmaline Oil

Weak diversification

The 3 months correlation between Vermilion and Tourmaline is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding Vermilion Energy and Tourmaline Oil Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tourmaline Oil Corp and Vermilion Energy 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 Vermilion Energy are associated (or correlated) with Tourmaline Oil. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tourmaline Oil Corp has no effect on the direction of Vermilion Energy i.e., Vermilion Energy and Tourmaline Oil go up and down completely randomly.

Pair Corralation between Vermilion Energy and Tourmaline Oil

Assuming the 90 days trading horizon Vermilion Energy is expected to under-perform the Tourmaline Oil. In addition to that, Vermilion Energy is 1.29 times more volatile than Tourmaline Oil Corp. It trades about -0.12 of its total potential returns per unit of risk. Tourmaline Oil Corp is currently generating about 0.03 per unit of volatility. If you would invest  6,563  in Tourmaline Oil Corp on November 28, 2024 and sell it today you would earn a total of  144.00  from holding Tourmaline Oil Corp or generate 2.19% return on investment over 90 days.

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

Vermilion Energy  vs.  Tourmaline Oil Corp

Vermilion Energy

Risk-Adjusted Performance

Very Weak

Over the last 90 days Vermilion Energy has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in March 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Tourmaline Oil Corp

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Tourmaline Oil Corp are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Tourmaline Oil is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Vermilion Energy and Tourmaline Oil

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

The idea behind Vermilion Energy and Tourmaline Oil Corp 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.