Correlation Between California Resources and Vitesse Energy

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

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

Diversification Opportunities for California Resources and Vitesse Energy

0.94

Correlation Coefficient

California Resources  Vitesse Energy

Almost no diversification

The 3 months correlation between California and Vitesse is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding California Resources Corp and Vitesse Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vitesse Energy and California 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 California Resources Corp are associated (or correlated) with Vitesse Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vitesse Energy has no effect on the direction of California Resources i.e., California Resources and Vitesse Energy go up and down completely randomly.

Pair Corralation between California Resources and Vitesse Energy

Considering the 90-day investment horizon California Resources is expected to generate 1.11 times less return on investment than Vitesse Energy. In addition to that, California Resources is 1.57 times more volatile than Vitesse Energy. It trades about 0.08 of its total potential returns per unit of risk. Vitesse Energy is currently generating about 0.15 per unit of volatility. If you would invest  2,407  in Vitesse Energy on September 13, 2024 and sell it today you would earn a total of  339.00  from holding Vitesse Energy or generate 14.08% return on investment over 90 days.

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

California Resources Corp  vs.  Vitesse Energy

California Resources Corp

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in California Resources Corp are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak basic indicators, California Resources may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Vitesse Energy

Risk-Adjusted Performance

11 of 100

Good

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

Pair Trading with California Resources and Vitesse Energy

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

The idea behind California Resources Corp and Vitesse 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 CEOs Directory module to screen CEOs from public companies around the world.