Correlation Between Vista Oil and Diversified Energy

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

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

Diversification Opportunities for Vista Oil and Diversified Energy

0.7

Correlation Coefficient

Vista Oil  Diversified Energy

Poor diversification

The 3 months correlation between Vista and Diversified is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Vista Oil Gas and Diversified Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Diversified Energy and Vista Oil 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 Vista Oil Gas are associated (or correlated) with Diversified Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Diversified Energy has no effect on the direction of Vista Oil i.e., Vista Oil and Diversified Energy go up and down completely randomly.

Pair Corralation between Vista Oil and Diversified Energy

Given the investment horizon of 90 days Vista Oil Gas is expected to generate 0.93 times more return on investment than Diversified Energy. However, Vista Oil Gas is 1.07 times less risky than Diversified Energy. It trades about 0.12 of its potential returns per unit of risk. Diversified Energy is currently generating about 0.05 per unit of risk. If you would invest  4,417  in Vista Oil Gas on February 23, 2024 and sell it today you would earn a total of  258.00  from holding Vista Oil Gas or generate 5.84% return on investment over 90 days.

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

Vista Oil Gas  vs.  Diversified Energy

Vista Oil Gas

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Vista Oil Gas are ranked lower than 16 (%) 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.

Diversified Energy

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Diversified Energy are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, Diversified Energy exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Vista Oil and Diversified Energy

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

The idea behind Vista Oil Gas and Diversified 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.

Check out your portfolio center.

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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.