Correlation Between Vistra Energy and Catalent

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

Diversification Opportunities for Vistra Energy and Catalent

-0.04

Correlation Coefficient

Vistra Energy  Catalent

Good diversification

The 3 months correlation between Vistra and Catalent is -0.04. Overlapping area represents the amount of risk that can be diversified away by holding Vistra Energy Corp and Catalent in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Catalent 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 Catalent. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Catalent has no effect on the direction of Vistra Energy i.e., Vistra Energy and Catalent go up and down completely randomly.

Pair Corralation between Vistra Energy and Catalent

Considering the 90-day investment horizon Vistra Energy Corp is expected to generate 5.51 times more return on investment than Catalent. However, Vistra Energy is 5.51 times more volatile than Catalent. It trades about 0.08 of its potential returns per unit of risk. Catalent is currently generating about 0.14 per unit of risk. If you would invest  12,235  in Vistra Energy Corp on October 1, 2024 and sell it today you would earn a total of  1,733  from holding Vistra Energy Corp or generate 14.16% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	89.06%
Values	Daily Returns

Vistra Energy Corp  vs.  Catalent

Vistra Energy Corp

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Vistra Energy Corp are ranked lower than 5 (%) 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.

Catalent

Risk-Adjusted Performance

0 of 100

Good

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

Pair Trading with Vistra Energy and Catalent

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

The idea behind Vistra Energy Corp and Catalent 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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.