Correlation Between GE Vernova and Vistra Energy

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

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

Diversification Opportunities for GE Vernova and Vistra Energy

0.89

Correlation Coefficient

GE Vernova  Vistra Energy

Very poor diversification

The 3 months correlation between GEV and Vistra is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding GE Vernova LLC 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 GE Vernova 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 GE Vernova LLC 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 GE Vernova i.e., GE Vernova and Vistra Energy go up and down completely randomly.

Pair Corralation between GE Vernova and Vistra Energy

Considering the 90-day investment horizon GE Vernova LLC is expected to generate 1.06 times more return on investment than Vistra Energy. However, GE Vernova is 1.06 times more volatile than Vistra Energy Corp. It trades about 0.19 of its potential returns per unit of risk. Vistra Energy Corp is currently generating about 0.14 per unit of risk. If you would invest  13,125  in GE Vernova LLC on September 12, 2024 and sell it today you would earn a total of  21,010  from holding GE Vernova LLC or generate 160.08% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	36.36%
Values	Daily Returns

GE Vernova LLC  vs.  Vistra Energy Corp

GE Vernova LLC

Risk-Adjusted Performance

22 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in GE Vernova LLC are ranked lower than 22 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak technical and fundamental indicators, GE Vernova showed solid returns over the last few months and may actually be approaching a breakup point.

Vistra Energy Corp

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Vistra Energy Corp are ranked lower than 18 (%) 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 GE Vernova and Vistra Energy

The main advantage of trading using opposite GE Vernova and Vistra Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GE Vernova 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 GE Vernova LLC 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.