Correlation Between Vistra Energy and New Horizon

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

Diversification Opportunities for Vistra Energy and New Horizon

0.59

Correlation Coefficient

Vistra Energy  New Horizon

Very weak diversification

The 3 months correlation between Vistra and New is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Vistra Energy Corp and New Horizon Aircraft in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on New Horizon Aircraft 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 New Horizon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of New Horizon Aircraft has no effect on the direction of Vistra Energy i.e., Vistra Energy and New Horizon go up and down completely randomly.

Pair Corralation between Vistra Energy and New Horizon

Considering the 90-day investment horizon Vistra Energy is expected to generate 9.2 times less return on investment than New Horizon. But when comparing it to its historical volatility, Vistra Energy Corp is 3.8 times less risky than New Horizon. It trades about 0.08 of its potential returns per unit of risk. New Horizon Aircraft is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest  45.00  in New Horizon Aircraft on October 11, 2024 and sell it today you would earn a total of  57.00  from holding New Horizon Aircraft or generate 126.67% return on investment over 90 days.

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

Vistra Energy Corp  vs.  New Horizon Aircraft

Vistra Energy Corp

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Vistra Energy Corp are ranked lower than 9 (%) 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.

New Horizon Aircraft

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in New Horizon Aircraft are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Even with relatively inconsistent basic indicators, New Horizon reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Vistra Energy and New Horizon

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

The idea behind Vistra Energy Corp and New Horizon Aircraft 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.