Correlation Between Vital Energy and Civitas Resources

Can any of the company-specific risk be diversified away by investing in both Vital 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 Vital 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 Vital Energy and Civitas Resources, you can compare the effects of market volatilities on Vital 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 Vital Energy with a short position of Civitas Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vital Energy and Civitas Resources.

Diversification Opportunities for Vital Energy and Civitas Resources

0.97

Correlation Coefficient

Vital Energy  Civitas Resources

Almost no diversification

The 3 months correlation between Vital and Civitas is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding Vital Energy and Civitas Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Civitas Resources and Vital 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 Vital 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 Vital Energy i.e., Vital Energy and Civitas Resources go up and down completely randomly.

Pair Corralation between Vital Energy and Civitas Resources

Given the investment horizon of 90 days Vital Energy is expected to under-perform the Civitas Resources. But the stock apears to be less risky and, when comparing its historical volatility, Vital Energy is 1.02 times less risky than Civitas Resources. The stock trades about -0.12 of its potential returns per unit of risk. The Civitas Resources is currently generating about -0.08 of returns per unit of risk over similar time horizon. If you would invest  4,394  in Civitas Resources on December 28, 2024 and sell it today you would lose (892.00) from holding Civitas Resources or give up 20.3% of portfolio value over 90 days.

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

Vital Energy  vs.  Civitas Resources

Vital Energy

Risk-Adjusted Performance

Very Weak

Over the last 90 days Vital Energy has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's essential indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Civitas Resources

Risk-Adjusted Performance

Very Weak

Over the last 90 days Civitas Resources has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in April 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Pair Trading with Vital Energy and Civitas Resources

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

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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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.