Correlation Between Datang International and Vistra Energy

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Can any of the company-specific risk be diversified away by investing in both Datang International 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 Datang International and Vistra Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Datang International Power and Vistra Energy Corp, you can compare the effects of market volatilities on Datang International 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 Datang International with a short position of Vistra Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Datang International and Vistra Energy.

Diversification Opportunities for Datang International and Vistra Energy

0.2
  Correlation Coefficient

Modest diversification

The 3 months correlation between Datang and Vistra is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Datang International Power 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 Datang International 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 Datang International Power 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 Datang International i.e., Datang International and Vistra Energy go up and down completely randomly.

Pair Corralation between Datang International and Vistra Energy

If you would invest  7,987  in Vistra Energy Corp on September 11, 2024 and sell it today you would earn a total of  6,844  from holding Vistra Energy Corp or generate 85.69% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy1.59%
ValuesDaily Returns

Datang International Power  vs.  Vistra Energy Corp

 Performance 
       Timeline  
Datang International 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Datang International Power has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical and fundamental indicators, Datang International is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.
Vistra Energy Corp 

Risk-Adjusted Performance

20 of 100

 
Weak
 
Strong
Solid
Compared to the overall equity markets, risk-adjusted returns on investments in Vistra Energy Corp are ranked lower than 20 (%) 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.

Datang International and Vistra Energy Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Datang International and Vistra Energy

The main advantage of trading using opposite Datang International and Vistra Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Datang International 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 Datang International Power 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..

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