Correlation Between Vista Oil and SM Energy

Can any of the company-specific risk be diversified away by investing in both Vista Oil and SM 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 SM 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 SM Energy Co, you can compare the effects of market volatilities on Vista Oil and SM 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 SM Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vista Oil and SM Energy.

Diversification Opportunities for Vista Oil and SM Energy

0.77

Correlation Coefficient

Vista Oil  SM Energy

Poor diversification

The 3 months correlation between Vista and SM Energy is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Vista Oil Gas and SM Energy Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SM 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 SM Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SM Energy has no effect on the direction of Vista Oil i.e., Vista Oil and SM Energy go up and down completely randomly.

Pair Corralation between Vista Oil and SM Energy

Given the investment horizon of 90 days Vista Oil Gas is expected to generate 1.07 times more return on investment than SM Energy. However, Vista Oil is 1.07 times more volatile than SM Energy Co. It trades about -0.14 of its potential returns per unit of risk. SM Energy Co is currently generating about -0.26 per unit of risk. If you would invest  5,744  in Vista Oil Gas on December 7, 2024 and sell it today you would lose (1,219) from holding Vista Oil Gas or give up 21.22% of portfolio value over 90 days.

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

Vista Oil Gas  vs.  SM Energy Co

Vista Oil Gas

Risk-Adjusted Performance

Very Weak

Over the last 90 days Vista Oil Gas has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

SM Energy

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Vista Oil and SM Energy

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

The idea behind Vista Oil Gas and SM Energy Co 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.