Correlation Between BCE and Vistra Energy

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

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

Diversification Opportunities for BCE and Vistra Energy

-0.39

Correlation Coefficient

BCE  Vistra Energy

Very good diversification

The 3 months correlation between BCE and Vistra is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding BCE 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 BCE 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 BCE 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 BCE i.e., BCE and Vistra Energy go up and down completely randomly.

Pair Corralation between BCE and Vistra Energy

Considering the 90-day investment horizon BCE is expected to generate 1.12 times less return on investment than Vistra Energy. But when comparing it to its historical volatility, BCE Inc is 3.41 times less risky than Vistra Energy. It trades about 0.02 of its potential returns per unit of risk. Vistra Energy Corp is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  14,386  in Vistra Energy Corp on December 26, 2024 and sell it today you would lose (1,205) from holding Vistra Energy Corp or give up 8.38% of portfolio value over 90 days.

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

BCE Inc  vs.  Vistra Energy Corp

BCE Inc

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in BCE Inc are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound fundamental indicators, BCE is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Vistra Energy Corp

Risk-Adjusted Performance

Very Weak

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

Pair Trading with BCE and Vistra Energy

The main advantage of trading using opposite BCE and Vistra Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BCE 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 BCE 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.