Correlation Between Evolution Petroleum and Vital Energy

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

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

Diversification Opportunities for Evolution Petroleum and Vital Energy

0.88

Correlation Coefficient

Evolution Petroleum  Vital Energy

Very poor diversification

The 3 months correlation between Evolution and Vital is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Evolution Petroleum and Vital Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vital Energy and Evolution Petroleum 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 Evolution Petroleum are associated (or correlated) with Vital Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vital Energy has no effect on the direction of Evolution Petroleum i.e., Evolution Petroleum and Vital Energy go up and down completely randomly.

Pair Corralation between Evolution Petroleum and Vital Energy

Considering the 90-day investment horizon Evolution Petroleum is expected to generate 0.71 times more return on investment than Vital Energy. However, Evolution Petroleum is 1.41 times less risky than Vital Energy. It trades about -0.03 of its potential returns per unit of risk. Vital Energy is currently generating about -0.06 per unit of risk. If you would invest  804.00  in Evolution Petroleum on April 1, 2025 and sell it today you would lose (334.00) from holding Evolution Petroleum or give up 41.54% of portfolio value over 90 days.

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

Evolution Petroleum  vs.  Vital Energy

Evolution Petroleum

Risk-Adjusted Performance

Very Weak

Over the last 90 days Evolution Petroleum has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Evolution Petroleum is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Vital Energy

Risk-Adjusted Performance

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 latest unfluctuating performance, the Stock's essential indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with Evolution Petroleum and Vital Energy

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

The idea behind Evolution Petroleum and Vital 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.