Correlation Between Vistra Energy and NiSource

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

Diversification Opportunities for Vistra Energy and NiSource

0.86

Correlation Coefficient

Vistra Energy  NiSource

Very poor diversification

The 3 months correlation between Vistra and NiSource is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Vistra Energy Corp and NiSource in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NiSource 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 NiSource. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NiSource has no effect on the direction of Vistra Energy i.e., Vistra Energy and NiSource go up and down completely randomly.

Pair Corralation between Vistra Energy and NiSource

Considering the 90-day investment horizon Vistra Energy Corp is expected to generate 3.44 times more return on investment than NiSource. However, Vistra Energy is 3.44 times more volatile than NiSource. It trades about 0.09 of its potential returns per unit of risk. NiSource is currently generating about 0.19 per unit of risk. If you would invest  13,841  in Vistra Energy Corp on September 4, 2024 and sell it today you would earn a total of  1,570  from holding Vistra Energy Corp or generate 11.34% return on investment over 90 days.

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

Vistra Energy Corp  vs.  NiSource

Vistra Energy Corp

Risk-Adjusted Performance

22 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Vistra Energy Corp are ranked lower than 22 (%) 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.

NiSource

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in NiSource are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak forward indicators, NiSource may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Vistra Energy and NiSource

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

The idea behind Vistra Energy Corp and NiSource 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.