Correlation Between Permianville Royalty and Vital Energy

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

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

Diversification Opportunities for Permianville Royalty and Vital Energy

0.03

Correlation Coefficient

Permianville Royalty  Vital Energy

Significant diversification

The 3 months correlation between Permianville and Vital is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding Permianville Royalty Trust and Vital Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vital Energy and Permianville Royalty 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 Permianville Royalty Trust are associated (or correlated) with Vital Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vital Energy has no effect on the direction of Permianville Royalty i.e., Permianville Royalty and Vital Energy go up and down completely randomly.

Pair Corralation between Permianville Royalty and Vital Energy

Considering the 90-day investment horizon Permianville Royalty Trust is expected to under-perform the Vital Energy. But the stock apears to be less risky and, when comparing its historical volatility, Permianville Royalty Trust is 1.74 times less risky than Vital Energy. The stock trades about -0.09 of its potential returns per unit of risk. The Vital Energy is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  2,611  in Vital Energy on September 26, 2024 and sell it today you would earn a total of  304.00  from holding Vital Energy or generate 11.64% return on investment over 90 days.

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

Permianville Royalty Trust  vs.  Vital Energy

Permianville Royalty

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Permianville Royalty Trust has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Vital Energy

Risk-Adjusted Performance

5 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Vital Energy are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of rather conflicting essential indicators, Vital Energy exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Permianville Royalty and Vital Energy

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

The idea behind Permianville Royalty Trust and Vital 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.