Correlation Between Contact Energy and Vistra Corp
Can any of the company-specific risk be diversified away by investing in both Contact Energy and Vistra Corp 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 Contact Energy and Vistra Corp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Contact Energy Limited and Vistra Corp, you can compare the effects of market volatilities on Contact Energy and Vistra Corp 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 Contact Energy with a short position of Vistra Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Contact Energy and Vistra Corp.
Diversification Opportunities for Contact Energy and Vistra Corp
0.74 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Contact and Vistra is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Contact Energy Limited and Vistra Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vistra Corp and Contact 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 Contact Energy Limited are associated (or correlated) with Vistra Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vistra Corp has no effect on the direction of Contact Energy i.e., Contact Energy and Vistra Corp go up and down completely randomly.
Pair Corralation between Contact Energy and Vistra Corp
Assuming the 90 days horizon Contact Energy is expected to generate 3.81 times less return on investment than Vistra Corp. But when comparing it to its historical volatility, Contact Energy Limited is 4.17 times less risky than Vistra Corp. It trades about 0.15 of its potential returns per unit of risk. Vistra Corp is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest 14,460 in Vistra Corp on November 2, 2024 and sell it today you would earn a total of 2,375 from holding Vistra Corp or generate 16.42% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Contact Energy Limited vs. Vistra Corp
Performance |
| Timeline |
| Contact Energy |
| Vistra Corp |
Contact Energy and Vistra Corp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Contact Energy and Vistra Corp
The main advantage of trading using opposite Contact Energy and Vistra Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Contact Energy position performs unexpectedly, Vistra Corp 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 Vistra Corp will offset losses from the drop in Vistra Corp's long position.| Contact Energy vs. Shin Etsu Chemical Co | Contact Energy vs. TIANDE CHEMICAL | Contact Energy vs. TRI CHEMICAL LABORATINC | Contact Energy vs. Siamgas And Petrochemicals |
| Vistra Corp vs. CN YANGTPWR GDR | Vistra Corp vs. Siemens Energy AG | Vistra Corp vs. Datang International Power |
Check out your portfolio center.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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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