Correlation Between Vital Energy and WesCan Energy

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

Diversification Opportunities for Vital Energy and WesCan Energy

0.1

Correlation Coefficient

Vital Energy  WesCan Energy

Average diversification

The 3 months correlation between Vital and WesCan is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding Vital Energy and WesCan Energy Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WesCan Energy Corp 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 WesCan Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WesCan Energy Corp has no effect on the direction of Vital Energy i.e., Vital Energy and WesCan Energy go up and down completely randomly.

Pair Corralation between Vital Energy and WesCan Energy

Assuming the 90 days horizon Vital Energy is expected to generate 3.33 times less return on investment than WesCan Energy. But when comparing it to its historical volatility, Vital Energy is 1.58 times less risky than WesCan Energy. It trades about 0.01 of its potential returns per unit of risk. WesCan Energy Corp is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  26.00  in WesCan Energy Corp on September 4, 2024 and sell it today you would lose (17.50) from holding WesCan Energy Corp or give up 67.31% of portfolio value over 90 days.

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

Vital Energy  vs.  WesCan Energy Corp

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 latest abnormal performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

WesCan Energy Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days WesCan Energy Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Pair Trading with Vital Energy and WesCan Energy

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

The idea behind Vital Energy and WesCan Energy Corp 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 CEOs Directory module to screen CEOs from public companies around the world.