Correlation Between Epsilon Energy and Vital Energy

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

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

Diversification Opportunities for Epsilon Energy and Vital Energy

0.56

Correlation Coefficient

Epsilon Energy  Vital Energy

Very weak diversification

The 3 months correlation between Epsilon and Vital is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding Epsilon Energy and Vital Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vital Energy and Epsilon 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 Epsilon Energy 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 Epsilon Energy i.e., Epsilon Energy and Vital Energy go up and down completely randomly.

Pair Corralation between Epsilon Energy and Vital Energy

Given the investment horizon of 90 days Epsilon Energy is expected to under-perform the Vital Energy. But the stock apears to be less risky and, when comparing its historical volatility, Epsilon Energy is 2.01 times less risky than Vital Energy. The stock trades about -0.04 of its potential returns per unit of risk. The Vital Energy is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  2,159  in Vital Energy on June 10, 2025 and sell it today you would lose (519.00) from holding Vital Energy or give up 24.04% of portfolio value over 90 days.

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

Epsilon Energy  vs.  Vital Energy

Epsilon Energy

Risk-Adjusted Performance

Weakest

Over the last 90 days Epsilon Energy has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in October 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Vital Energy

Risk-Adjusted Performance

Weakest

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.

Pair Trading with Epsilon Energy and Vital Energy

The main advantage of trading using opposite Epsilon Energy and Vital Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Epsilon Energy 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 Epsilon Energy 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.

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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.