Correlation Between Veren and Expand Energy

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

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

Diversification Opportunities for Veren and Expand Energy

-0.77

Correlation Coefficient

Veren  Expand Energy

Pay attention - limited upside

The 3 months correlation between Veren and Expand is -0.77. Overlapping area represents the amount of risk that can be diversified away by holding Veren Inc and Expand Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Expand Energy and Veren 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 Veren Inc are associated (or correlated) with Expand Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Expand Energy has no effect on the direction of Veren i.e., Veren and Expand Energy go up and down completely randomly.

Pair Corralation between Veren and Expand Energy

Considering the 90-day investment horizon Veren Inc is expected to under-perform the Expand Energy. But the stock apears to be less risky and, when comparing its historical volatility, Veren Inc is 1.11 times less risky than Expand Energy. The stock trades about -0.13 of its potential returns per unit of risk. The Expand Energy is currently generating about 0.26 of returns per unit of risk over similar time horizon. If you would invest  5,684  in Expand Energy on September 16, 2024 and sell it today you would earn a total of  3,337  from holding Expand Energy or generate 58.71% return on investment over 90 days.

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

Veren Inc  vs.  Expand Energy

Veren Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Veren Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of inconsistent performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in January 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Expand Energy

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Expand Energy are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. In spite of fairly inconsistent technical and fundamental indicators, Expand Energy showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Veren and Expand Energy

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

The idea behind Veren Inc and Expand 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.