Correlation Between Vital Energy and Vista Oil

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

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

Diversification Opportunities for Vital Energy and Vista Oil

0.41

Correlation Coefficient

Vital Energy  Vista Oil

Very weak diversification

The 3 months correlation between Vital and Vista is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Vital Energy and Vista Oil Gas in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vista Oil Gas 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 Vista Oil. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vista Oil Gas has no effect on the direction of Vital Energy i.e., Vital Energy and Vista Oil go up and down completely randomly.

Pair Corralation between Vital Energy and Vista Oil

Given the investment horizon of 90 days Vital Energy is expected to under-perform the Vista Oil. But the stock apears to be less risky and, when comparing its historical volatility, Vital Energy is 1.05 times less risky than Vista Oil. The stock trades about -0.12 of its potential returns per unit of risk. The Vista Oil Gas is currently generating about 0.26 of returns per unit of risk over similar time horizon. If you would invest  5,009  in Vista Oil Gas on September 19, 2024 and sell it today you would earn a total of  791.00  from holding Vista Oil Gas or generate 15.79% return on investment over 90 days.

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

Vital Energy  vs.  Vista Oil Gas

Vital Energy

Risk-Adjusted Performance

0 of 100

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 rather sound essential indicators, Vital Energy is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Vista Oil Gas

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Vista Oil Gas are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, Vista Oil unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Vital Energy and Vista Oil

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

The idea behind Vital Energy and Vista Oil Gas 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.