Correlation Between Civitas Resources and Obsidian Energy

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

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

Diversification Opportunities for Civitas Resources and Obsidian Energy

0.93

Correlation Coefficient

Civitas Resources  Obsidian Energy

Almost no diversification

The 3 months correlation between Civitas and Obsidian is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Civitas Resources and Obsidian Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Obsidian Energy and Civitas Resources 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 Civitas Resources are associated (or correlated) with Obsidian Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Obsidian Energy has no effect on the direction of Civitas Resources i.e., Civitas Resources and Obsidian Energy go up and down completely randomly.

Pair Corralation between Civitas Resources and Obsidian Energy

Given the investment horizon of 90 days Civitas Resources is expected to under-perform the Obsidian Energy. But the stock apears to be less risky and, when comparing its historical volatility, Civitas Resources is 1.24 times less risky than Obsidian Energy. The stock trades about -0.01 of its potential returns per unit of risk. The Obsidian Energy is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  693.00  in Obsidian Energy on February 2, 2024 and sell it today you would earn a total of  104.00  from holding Obsidian Energy or generate 15.01% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	99.47%
Values	Daily Returns

Civitas Resources  vs.  Obsidian Energy

Civitas Resources

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Civitas Resources are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak basic indicators, Civitas Resources demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Obsidian Energy

Risk-Adjusted Performance

13 of 100

Good

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

Pair Trading with Civitas Resources and Obsidian Energy

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

The idea behind Civitas Resources and Obsidian 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.