Correlation Between Sabine Royalty and Vermilion Energy

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

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

Diversification Opportunities for Sabine Royalty and Vermilion Energy

0.06

Correlation Coefficient

Sabine Royalty  Vermilion Energy

Significant diversification

The 3 months correlation between Sabine and Vermilion is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding Sabine Royalty Trust and Vermilion Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vermilion Energy and Sabine 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 Sabine Royalty Trust are associated (or correlated) with Vermilion Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vermilion Energy has no effect on the direction of Sabine Royalty i.e., Sabine Royalty and Vermilion Energy go up and down completely randomly.

Pair Corralation between Sabine Royalty and Vermilion Energy

Considering the 90-day investment horizon Sabine Royalty Trust is expected to generate 0.62 times more return on investment than Vermilion Energy. However, Sabine Royalty Trust is 1.62 times less risky than Vermilion Energy. It trades about 0.15 of its potential returns per unit of risk. Vermilion Energy is currently generating about -0.03 per unit of risk. If you would invest  5,830  in Sabine Royalty Trust on September 26, 2024 and sell it today you would earn a total of  752.00  from holding Sabine Royalty Trust or generate 12.9% return on investment over 90 days.

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

Sabine Royalty Trust  vs.  Vermilion Energy

Sabine Royalty Trust

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Sabine Royalty Trust are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak fundamental drivers, Sabine Royalty reported solid returns over the last few months and may actually be approaching a breakup point.

Vermilion Energy

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Vermilion Energy has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable technical and fundamental indicators, Vermilion Energy is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Sabine Royalty and Vermilion Energy

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

The idea behind Sabine Royalty Trust and Vermilion 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..