Correlation Between Vistra Energy and 40414LAM1

Can any of the company-specific risk be diversified away by investing in both Vistra Energy and 40414LAM1 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 40414LAM1 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 HCP INC 34, you can compare the effects of market volatilities on Vistra Energy and 40414LAM1 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 40414LAM1. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vistra Energy and 40414LAM1.

Diversification Opportunities for Vistra Energy and 40414LAM1

-0.18

Correlation Coefficient

Vistra Energy  40414LAM1

Good diversification

The 3 months correlation between Vistra and 40414LAM1 is -0.18. Overlapping area represents the amount of risk that can be diversified away by holding Vistra Energy Corp and HCP INC 34 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HCP INC 34 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 40414LAM1. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HCP INC 34 has no effect on the direction of Vistra Energy i.e., Vistra Energy and 40414LAM1 go up and down completely randomly.

Pair Corralation between Vistra Energy and 40414LAM1

Considering the 90-day investment horizon Vistra Energy Corp is expected to generate 6.27 times more return on investment than 40414LAM1. However, Vistra Energy is 6.27 times more volatile than HCP INC 34. It trades about 0.3 of its potential returns per unit of risk. HCP INC 34 is currently generating about -0.03 per unit of risk. If you would invest  7,565  in Vistra Energy Corp on September 5, 2024 and sell it today you would earn a total of  7,851  from holding Vistra Energy Corp or generate 103.78% 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.  HCP INC 34

Vistra Energy Corp

Risk-Adjusted Performance

23 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Vistra Energy Corp are ranked lower than 23 (%) 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.

HCP INC 34

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days HCP INC 34 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, 40414LAM1 is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Vistra Energy and 40414LAM1

The main advantage of trading using opposite Vistra Energy and 40414LAM1 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vistra Energy position performs unexpectedly, 40414LAM1 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 40414LAM1 will offset losses from the drop in 40414LAM1's long position.

The idea behind Vistra Energy Corp and HCP INC 34 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.