Correlation Between Vistra Energy and Cheniere Energy

Can any of the company-specific risk be diversified away by investing in both Vistra Energy and Cheniere 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 Vistra Energy and Cheniere Energy 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 Cheniere Energy Partners, you can compare the effects of market volatilities on Vistra Energy and Cheniere 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 Vistra Energy with a short position of Cheniere Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vistra Energy and Cheniere Energy.

Diversification Opportunities for Vistra Energy and Cheniere Energy

-0.16

Correlation Coefficient

Vistra Energy  Cheniere Energy

Good diversification

The 3 months correlation between Vistra and Cheniere is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding Vistra Energy Corp and Cheniere Energy Partners in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cheniere Energy Partners 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 Cheniere Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cheniere Energy Partners has no effect on the direction of Vistra Energy i.e., Vistra Energy and Cheniere Energy go up and down completely randomly.

Pair Corralation between Vistra Energy and Cheniere Energy

Considering the 90-day investment horizon Vistra Energy Corp is expected to under-perform the Cheniere Energy. In addition to that, Vistra Energy is 2.51 times more volatile than Cheniere Energy Partners. It trades about -0.01 of its total potential returns per unit of risk. Cheniere Energy Partners is currently generating about 0.14 per unit of volatility. If you would invest  5,290  in Cheniere Energy Partners on December 28, 2024 and sell it today you would earn a total of  1,079  from holding Cheniere Energy Partners or generate 20.4% return on investment over 90 days.

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

Vistra Energy Corp  vs.  Cheniere Energy Partners

Vistra Energy Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Vistra Energy Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Vistra Energy is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Cheniere Energy Partners

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Cheniere Energy Partners are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Even with relatively conflicting basic indicators, Cheniere Energy reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Vistra Energy and Cheniere Energy

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

The idea behind Vistra Energy Corp and Cheniere Energy Partners 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.