Correlation Between Vital Energy and Talos Energy

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

Diversification Opportunities for Vital Energy and Talos Energy

0.82

Correlation Coefficient

Vital Energy  Talos Energy

Very poor diversification

The 3 months correlation between Vital and Talos is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Vital Energy and Talos Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Talos Energy 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 Talos Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Talos Energy has no effect on the direction of Vital Energy i.e., Vital Energy and Talos Energy go up and down completely randomly.

Pair Corralation between Vital Energy and Talos Energy

Given the investment horizon of 90 days Vital Energy is expected to under-perform the Talos Energy. In addition to that, Vital Energy is 1.36 times more volatile than Talos Energy. It trades about -0.1 of its total potential returns per unit of risk. Talos Energy is currently generating about 0.03 per unit of volatility. If you would invest  924.00  in Talos Energy on December 27, 2024 and sell it today you would earn a total of  33.00  from holding Talos Energy or generate 3.57% return on investment over 90 days.

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

Vital Energy  vs.  Talos Energy

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.

Talos Energy

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Talos Energy are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy essential indicators, Talos Energy is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Vital Energy and Talos Energy

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

The idea behind Vital Energy and Talos 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.

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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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.