Correlation Between Woodside Energy and Vitesse Energy

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

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

Diversification Opportunities for Woodside Energy and Vitesse Energy

-0.39

Correlation Coefficient

Woodside Energy  Vitesse Energy

Very good diversification

The 3 months correlation between Woodside and Vitesse is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding Woodside Energy Group and Vitesse Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vitesse Energy and Woodside 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 Woodside Energy Group are associated (or correlated) with Vitesse Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vitesse Energy has no effect on the direction of Woodside Energy i.e., Woodside Energy and Vitesse Energy go up and down completely randomly.

Pair Corralation between Woodside Energy and Vitesse Energy

Considering the 90-day investment horizon Woodside Energy Group is expected to under-perform the Vitesse Energy. In addition to that, Woodside Energy is 1.41 times more volatile than Vitesse Energy. It trades about -0.14 of its total potential returns per unit of risk. Vitesse Energy is currently generating about 0.15 per unit of volatility. If you would invest  2,532  in Vitesse Energy on September 13, 2024 and sell it today you would earn a total of  214.00  from holding Vitesse Energy or generate 8.45% return on investment over 90 days.

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

Woodside Energy Group  vs.  Vitesse Energy

Woodside Energy Group

Risk-Adjusted Performance

0 of 100

Very Weak

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

Vitesse Energy

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Vitesse Energy are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Vitesse Energy unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Woodside Energy and Vitesse Energy

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

The idea behind Woodside Energy Group and Vitesse 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.

Check out your portfolio center.

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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.