Correlation Between Vital Energy and Foothills Exploration

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

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

Diversification Opportunities for Vital Energy and Foothills Exploration

0.0

Correlation Coefficient

Vital Energy  Foothills Exploration

Pay attention - limited upside

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

Pair Corralation between Vital Energy and Foothills Exploration

Given the investment horizon of 90 days Vital Energy is expected to under-perform the Foothills Exploration. But the stock apears to be less risky and, when comparing its historical volatility, Vital Energy is 10.03 times less risky than Foothills Exploration. The stock trades about -0.02 of its potential returns per unit of risk. The Foothills Exploration is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  0.02  in Foothills Exploration on October 26, 2024 and sell it today you would lose (0.01) from holding Foothills Exploration or give up 50.0% of portfolio value over 90 days.

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

Vital Energy  vs.  Foothills Exploration

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.

Foothills Exploration

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Foothills Exploration has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Foothills Exploration is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Vital Energy and Foothills Exploration

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

The idea behind Vital Energy and Foothills Exploration 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..