Correlation Between Vista Oil and Epsilon Energy

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

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

Diversification Opportunities for Vista Oil and Epsilon Energy

0.2

Correlation Coefficient

Vista Oil  Epsilon Energy

Modest diversification

The 3 months correlation between Vista and Epsilon is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Vista Oil Gas and Epsilon Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Epsilon Energy and Vista Oil 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 Vista Oil Gas are associated (or correlated) with Epsilon Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Epsilon Energy has no effect on the direction of Vista Oil i.e., Vista Oil and Epsilon Energy go up and down completely randomly.

Pair Corralation between Vista Oil and Epsilon Energy

Given the investment horizon of 90 days Vista Oil Gas is expected to generate 1.53 times more return on investment than Epsilon Energy. However, Vista Oil is 1.53 times more volatile than Epsilon Energy. It trades about 0.26 of its potential returns per unit of risk. Epsilon Energy is currently generating about 0.11 per unit of risk. If you would invest  5,009  in Vista Oil Gas on September 19, 2024 and sell it today you would earn a total of  791.00  from holding Vista Oil Gas or generate 15.79% return on investment over 90 days.

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

Vista Oil Gas  vs.  Epsilon Energy

Vista Oil Gas

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Vista Oil Gas are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, Vista Oil unveiled solid returns over the last few months and may actually be approaching a breakup point.

Epsilon Energy

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Epsilon Energy are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, Epsilon Energy displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Vista Oil and Epsilon Energy

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

The idea behind Vista Oil Gas and Epsilon 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.

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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.