Correlation Between Catalent and Vistra Energy

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

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

Diversification Opportunities for Catalent and Vistra Energy

0.17

Correlation Coefficient

Catalent  Vistra Energy

Average diversification

The 3 months correlation between Catalent and Vistra is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding Catalent 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 Catalent 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 Catalent 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 Catalent i.e., Catalent and Vistra Energy go up and down completely randomly.

Pair Corralation between Catalent and Vistra Energy

Given the investment horizon of 90 days Catalent is expected to generate 4.74 times less return on investment than Vistra Energy. But when comparing it to its historical volatility, Catalent is 7.33 times less risky than Vistra Energy. It trades about 0.17 of its potential returns per unit of risk. 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 Together
Strength	Insignificant
Accuracy	98.43%
Values	Daily Returns

Catalent  vs.  Vistra Energy Corp

Catalent

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Catalent are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable essential indicators, Catalent is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private 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 Catalent and Vistra Energy

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

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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.