Correlation Between Vermilion Energy and SandRidge Energy

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

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

Diversification Opportunities for Vermilion Energy and SandRidge Energy

0.71

Correlation Coefficient

Vermilion Energy  SandRidge Energy

Poor diversification

The 3 months correlation between Vermilion and SandRidge is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Vermilion Energy and SandRidge Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SandRidge Energy 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 SandRidge Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SandRidge Energy has no effect on the direction of Vermilion Energy i.e., Vermilion Energy and SandRidge Energy go up and down completely randomly.

Pair Corralation between Vermilion Energy and SandRidge Energy

Considering the 90-day investment horizon Vermilion Energy is expected to under-perform the SandRidge Energy. In addition to that, Vermilion Energy is 1.38 times more volatile than SandRidge Energy. It trades about -0.04 of its total potential returns per unit of risk. SandRidge Energy is currently generating about 0.0 per unit of volatility. If you would invest  1,151  in SandRidge Energy on December 30, 2024 and sell it today you would lose (9.00) from holding SandRidge Energy or give up 0.78% of portfolio value over 90 days.

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

Vermilion Energy  vs.  SandRidge Energy

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 latest unsteady performance, the Stock's technical and fundamental indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

SandRidge Energy

Risk-Adjusted Performance

Very Weak

Over the last 90 days SandRidge Energy has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound fundamental indicators, SandRidge Energy is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Vermilion Energy and SandRidge Energy

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

The idea behind Vermilion Energy and SandRidge 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.