Correlation Between Vistra Energy and Southland Holdings

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

Diversification Opportunities for Vistra Energy and Southland Holdings

-0.42

Correlation Coefficient

Vistra Energy  Southland Holdings

Very good diversification

The 3 months correlation between Vistra and Southland is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding Vistra Energy Corp and Southland Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Southland Holdings 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 Southland Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Southland Holdings has no effect on the direction of Vistra Energy i.e., Vistra Energy and Southland Holdings go up and down completely randomly.

Pair Corralation between Vistra Energy and Southland Holdings

Considering the 90-day investment horizon Vistra Energy Corp is expected to under-perform the Southland Holdings. But the stock apears to be less risky and, when comparing its historical volatility, Vistra Energy Corp is 1.04 times less risky than Southland Holdings. The stock trades about -0.12 of its potential returns per unit of risk. The Southland Holdings is currently generating about 0.25 of returns per unit of risk over similar time horizon. If you would invest  309.00  in Southland Holdings on September 24, 2024 and sell it today you would earn a total of  56.00  from holding Southland Holdings or generate 18.12% return on investment over 90 days.

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

Vistra Energy Corp  vs.  Southland Holdings

Vistra Energy Corp

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Vistra Energy Corp are ranked lower than 8 (%) 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.

Southland Holdings

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Southland Holdings are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating basic indicators, Southland Holdings may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Vistra Energy and Southland Holdings

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

The idea behind Vistra Energy Corp and Southland Holdings 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.