Correlation Between National Vision and Talen Energy

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

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

Diversification Opportunities for National Vision and Talen Energy

-0.02

Correlation Coefficient

National Vision  Talen Energy

Good diversification

The 3 months correlation between National and Talen is -0.02. Overlapping area represents the amount of risk that can be diversified away by holding National Vision Holdings and Talen Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Talen Energy and National Vision 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 National Vision Holdings are associated (or correlated) with Talen Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Talen Energy has no effect on the direction of National Vision i.e., National Vision and Talen Energy go up and down completely randomly.

Pair Corralation between National Vision and Talen Energy

Considering the 90-day investment horizon National Vision Holdings is expected to generate 0.59 times more return on investment than Talen Energy. However, National Vision Holdings is 1.7 times less risky than Talen Energy. It trades about 0.17 of its potential returns per unit of risk. Talen Energy is currently generating about 0.03 per unit of risk. If you would invest  1,010  in National Vision Holdings on December 28, 2024 and sell it today you would earn a total of  316.00  from holding National Vision Holdings or generate 31.29% return on investment over 90 days.

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

National Vision Holdings  vs.  Talen Energy

National Vision Holdings

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in National Vision Holdings are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of rather inconsistent basic indicators, National Vision exhibited solid returns over the last few months and may actually be approaching a breakup point.

Talen Energy

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Talen Energy are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very weak essential indicators, Talen Energy may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with National Vision and Talen Energy

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

The idea behind National Vision Holdings and Talen 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.