Correlation Between PEDEVCO Corp and Vaalco Energy

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

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

Diversification Opportunities for PEDEVCO Corp and Vaalco Energy

0.9

Correlation Coefficient

PEDEVCO Corp  Vaalco Energy

Almost no diversification

The 3 months correlation between PEDEVCO and Vaalco is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding PEDEVCO Corp and Vaalco Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vaalco Energy and PEDEVCO Corp 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 PEDEVCO Corp are associated (or correlated) with Vaalco Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vaalco Energy has no effect on the direction of PEDEVCO Corp i.e., PEDEVCO Corp and Vaalco Energy go up and down completely randomly.

Pair Corralation between PEDEVCO Corp and Vaalco Energy

Considering the 90-day investment horizon PEDEVCO Corp is expected to under-perform the Vaalco Energy. In addition to that, PEDEVCO Corp is 1.09 times more volatile than Vaalco Energy. It trades about -0.11 of its total potential returns per unit of risk. Vaalco Energy is currently generating about -0.08 per unit of volatility. If you would invest  565.00  in Vaalco Energy on September 15, 2024 and sell it today you would lose (71.00) from holding Vaalco Energy or give up 12.57% of portfolio value over 90 days.

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

PEDEVCO Corp  vs.  Vaalco Energy

PEDEVCO Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days PEDEVCO Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Vaalco Energy

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Vaalco Energy has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's technical and fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with PEDEVCO Corp and Vaalco Energy

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

The idea behind PEDEVCO Corp and Vaalco 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 Stocks Directory module to find actively traded stocks across global markets.