Correlation Between Vermilion Energy and Civitas Resources

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

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

Diversification Opportunities for Vermilion Energy and Civitas Resources

0.82

Correlation Coefficient

Vermilion Energy  Civitas Resources

Very poor diversification

The 3 months correlation between Vermilion and Civitas is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Vermilion Energy and Civitas Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Civitas Resources 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 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 Vermilion Energy i.e., Vermilion Energy and Civitas Resources go up and down completely randomly.

Pair Corralation between Vermilion Energy and Civitas Resources

Considering the 90-day investment horizon Vermilion Energy is expected to generate 1.59 times less return on investment than Civitas Resources. But when comparing it to its historical volatility, Vermilion Energy is 1.2 times less risky than Civitas Resources. It trades about 0.3 of its potential returns per unit of risk. Civitas Resources is currently generating about 0.4 of returns per unit of risk over similar time horizon. If you would invest  4,385  in Civitas Resources on October 27, 2024 and sell it today you would earn a total of  732.00  from holding Civitas Resources or generate 16.69% return on investment over 90 days.

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

Vermilion Energy  vs.  Civitas Resources

Vermilion Energy

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Vermilion Energy are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable technical and fundamental indicators, Vermilion Energy is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Civitas Resources

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Civitas Resources are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak basic indicators, Civitas Resources may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Vermilion Energy and Civitas Resources

The main advantage of trading using opposite Vermilion Energy and Civitas Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vermilion Energy 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 Vermilion Energy 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.

Check out your portfolio center.

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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.