Correlation Between Vital Energy and Calima Energy

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

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

Diversification Opportunities for Vital Energy and Calima Energy

0.0

Correlation Coefficient

Vital Energy  Calima Energy

Pay attention - limited upside

The 3 months correlation between Vital and Calima is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Vital Energy and Calima Energy Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Calima Energy Limited 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 Calima Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Calima Energy Limited has no effect on the direction of Vital Energy i.e., Vital Energy and Calima Energy go up and down completely randomly.

Pair Corralation between Vital Energy and Calima Energy

Given the investment horizon of 90 days Vital Energy is expected to under-perform the Calima Energy. But the stock apears to be less risky and, when comparing its historical volatility, Vital Energy is 16.56 times less risky than Calima Energy. The stock trades about -0.02 of its potential returns per unit of risk. The Calima Energy Limited is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  9.45  in Calima Energy Limited on October 26, 2024 and sell it today you would lose (8.20) from holding Calima Energy Limited or give up 86.77% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	99.8%
Values	Daily Returns

Vital Energy  vs.  Calima Energy Limited

Vital Energy

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Vital Energy are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating essential indicators, Vital Energy exhibited solid returns over the last few months and may actually be approaching a breakup point.

Calima Energy Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Calima Energy Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical and fundamental indicators, Calima Energy is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Vital Energy and Calima Energy

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

The idea behind Vital Energy and Calima Energy Limited 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.