Correlation Between Vistra Energy and Canlan Ice

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

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

Diversification Opportunities for Vistra Energy and Canlan Ice

0.66

Correlation Coefficient

Vistra Energy  Canlan Ice

Poor diversification

The 3 months correlation between Vistra and Canlan is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Vistra Energy Corp and Canlan Ice Sports in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Canlan Ice Sports and Vistra Energy 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 Vistra Energy Corp are associated (or correlated) with Canlan Ice. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Canlan Ice Sports has no effect on the direction of Vistra Energy i.e., Vistra Energy and Canlan Ice go up and down completely randomly.

Pair Corralation between Vistra Energy and Canlan Ice

Considering the 90-day investment horizon Vistra Energy Corp is expected to generate 28.4 times more return on investment than Canlan Ice. However, Vistra Energy is 28.4 times more volatile than Canlan Ice Sports. It trades about 0.2 of its potential returns per unit of risk. Canlan Ice Sports is currently generating about 0.13 per unit of risk. If you would invest  12,757  in Vistra Energy Corp on October 26, 2024 and sell it today you would earn a total of  6,366  from holding Vistra Energy Corp or generate 49.9% return on investment over 90 days.

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

Vistra Energy Corp  vs.  Canlan Ice Sports

Vistra Energy Corp

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Vistra Energy Corp are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Vistra Energy unveiled solid returns over the last few months and may actually be approaching a breakup point.

Canlan Ice Sports

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Canlan Ice Sports are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable technical and fundamental indicators, Canlan Ice is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Vistra Energy and Canlan Ice

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

The idea behind Vistra Energy Corp and Canlan Ice Sports 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.