Correlation Between Vital Energy and Crescent Energy

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

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

Diversification Opportunities for Vital Energy and Crescent Energy

0.45

Correlation Coefficient

Vital Energy  Crescent Energy

Very weak diversification

The 3 months correlation between Vital and Crescent is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Vital Energy and Crescent Energy Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Crescent Energy 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 Crescent Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Crescent Energy has no effect on the direction of Vital Energy i.e., Vital Energy and Crescent Energy go up and down completely randomly.

Pair Corralation between Vital Energy and Crescent Energy

Given the investment horizon of 90 days Vital Energy is expected to under-perform the Crescent Energy. In addition to that, Vital Energy is 1.08 times more volatile than Crescent Energy Co. It trades about -0.02 of its total potential returns per unit of risk. Crescent Energy Co is currently generating about 0.03 per unit of volatility. If you would invest  1,123  in Crescent Energy Co on September 1, 2024 and sell it today you would earn a total of  364.00  from holding Crescent Energy Co or generate 32.41% return on investment over 90 days.

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

Vital Energy  vs.  Crescent Energy Co

Vital Energy

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Vital Energy has generated negative risk-adjusted returns adding no value to investors with long positions. 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.

Crescent Energy

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Crescent Energy Co are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal technical and fundamental indicators, Crescent Energy showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Vital Energy and Crescent Energy

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

The idea behind Vital Energy and Crescent Energy Co 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .