Correlation Between Vistra Energy and Fomento Economico

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

Diversification Opportunities for Vistra Energy and Fomento Economico

-0.68

Correlation Coefficient

Vistra Energy  Fomento Economico

Excellent diversification

The 3 months correlation between Vistra and Fomento is -0.68. Overlapping area represents the amount of risk that can be diversified away by holding Vistra Energy Corp and Fomento Economico Mexicano in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fomento Economico 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 Fomento Economico. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fomento Economico has no effect on the direction of Vistra Energy i.e., Vistra Energy and Fomento Economico go up and down completely randomly.

Pair Corralation between Vistra Energy and Fomento Economico

Considering the 90-day investment horizon Vistra Energy is expected to generate 4.0 times less return on investment than Fomento Economico. In addition to that, Vistra Energy is 3.53 times more volatile than Fomento Economico Mexicano. It trades about 0.01 of its total potential returns per unit of risk. Fomento Economico Mexicano is currently generating about 0.15 per unit of volatility. If you would invest  8,635  in Fomento Economico Mexicano on December 20, 2024 and sell it today you would earn a total of  1,308  from holding Fomento Economico Mexicano or generate 15.15% return on investment over 90 days.

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

Vistra Energy Corp  vs.  Fomento Economico Mexicano

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.

Fomento Economico

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Fomento Economico Mexicano are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal primary indicators, Fomento Economico showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Vistra Energy and Fomento Economico

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

The idea behind Vistra Energy Corp and Fomento Economico Mexicano 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.