Correlation Between Amgen and Vistra Energy

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

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

Diversification Opportunities for Amgen and Vistra Energy

-0.74

Correlation Coefficient

Amgen  Vistra Energy

Pay attention - limited upside

The 3 months correlation between Amgen and Vistra is -0.74. Overlapping area represents the amount of risk that can be diversified away by holding Amgen Inc and Vistra Energy Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vistra Energy Corp and Amgen 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 Amgen Inc are associated (or correlated) with Vistra Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vistra Energy Corp has no effect on the direction of Amgen i.e., Amgen and Vistra Energy go up and down completely randomly.

Pair Corralation between Amgen and Vistra Energy

Given the investment horizon of 90 days Amgen Inc is expected to under-perform the Vistra Energy. But the stock apears to be less risky and, when comparing its historical volatility, Amgen Inc is 2.74 times less risky than Vistra Energy. The stock trades about -0.08 of its potential returns per unit of risk. The Vistra Energy Corp is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  8,788  in Vistra Energy Corp on September 22, 2024 and sell it today you would earn a total of  5,207  from holding Vistra Energy Corp or generate 59.25% return on investment over 90 days.

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

Amgen Inc  vs.  Vistra Energy Corp

Amgen Inc

Risk-Adjusted Performance

0 of 100

Very Weak

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

Vistra Energy Corp

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Vistra Energy Corp are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating basic indicators, Vistra Energy unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Amgen and Vistra Energy

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

The idea behind Amgen Inc and Vistra Energy Corp 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.