Correlation Between Vaalco Energy and WisdomTree Europe

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

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

Diversification Opportunities for Vaalco Energy and WisdomTree Europe

0.11

Correlation Coefficient

Vaalco Energy  WisdomTree Europe

Average diversification

The 3 months correlation between Vaalco and WisdomTree is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding Vaalco Energy and WisdomTree Europe Hedged in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WisdomTree Europe Hedged and Vaalco 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 Vaalco Energy are associated (or correlated) with WisdomTree Europe. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WisdomTree Europe Hedged has no effect on the direction of Vaalco Energy i.e., Vaalco Energy and WisdomTree Europe go up and down completely randomly.

Pair Corralation between Vaalco Energy and WisdomTree Europe

Considering the 90-day investment horizon Vaalco Energy is expected to generate 1.13 times less return on investment than WisdomTree Europe. In addition to that, Vaalco Energy is 5.69 times more volatile than WisdomTree Europe Hedged. It trades about 0.08 of its total potential returns per unit of risk. WisdomTree Europe Hedged is currently generating about 0.5 per unit of volatility. If you would invest  4,417  in WisdomTree Europe Hedged on May 5, 2025 and sell it today you would earn a total of  218.00  from holding WisdomTree Europe Hedged or generate 4.94% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	31.75%
Values	Daily Returns

Vaalco Energy  vs.  WisdomTree Europe Hedged

Vaalco Energy

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Vaalco Energy are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak technical and fundamental indicators, Vaalco Energy showed solid returns over the last few months and may actually be approaching a breakup point.

WisdomTree Europe Hedged

Risk-Adjusted Performance

Very Strong

Over the last 90 days WisdomTree Europe Hedged has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather fragile basic indicators, WisdomTree Europe exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Vaalco Energy and WisdomTree Europe

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

The idea behind Vaalco Energy and WisdomTree Europe Hedged 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.