Correlation Between Vital Energy and Borders Southern

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

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

Diversification Opportunities for Vital Energy and Borders Southern

-0.43

Correlation Coefficient

Vital Energy  Borders Southern

Very good diversification

The 3 months correlation between Vital and Borders is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding Vital Energy and Borders Southern Petroleum in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Borders Southern Pet and Vital Energy 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 Vital Energy are associated (or correlated) with Borders Southern. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Borders Southern Pet has no effect on the direction of Vital Energy i.e., Vital Energy and Borders Southern go up and down completely randomly.

Pair Corralation between Vital Energy and Borders Southern

Given the investment horizon of 90 days Vital Energy is expected to under-perform the Borders Southern. But the stock apears to be less risky and, when comparing its historical volatility, Vital Energy is 3.46 times less risky than Borders Southern. The stock trades about -0.02 of its potential returns per unit of risk. The Borders Southern Petroleum is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  2.09  in Borders Southern Petroleum on September 5, 2024 and sell it today you would earn a total of  0.91  from holding Borders Southern Petroleum or generate 43.54% return on investment over 90 days.

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

Vital Energy  vs.  Borders Southern Petroleum

Vital Energy

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Vital Energy are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound essential indicators, Vital Energy is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Borders Southern Pet

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Borders Southern Petroleum has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Vital Energy and Borders Southern

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

The idea behind Vital Energy and Borders Southern Petroleum 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.