Correlation Between RWE AG and Vistra Energy
Can any of the company-specific risk be diversified away by investing in both RWE AG and Vistra Energy 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 RWE AG and Vistra Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between RWE AG PK and Vistra Energy Corp, you can compare the effects of market volatilities on RWE AG and Vistra Energy 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 RWE AG with a short position of Vistra Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of RWE AG and Vistra Energy.
Diversification Opportunities for RWE AG and Vistra Energy
-0.76 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between RWE and Vistra is -0.76. Overlapping area represents the amount of risk that can be diversified away by holding RWE AG PK and Vistra Energy Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vistra Energy Corp and RWE AG 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 RWE AG PK are associated (or correlated) with Vistra Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vistra Energy Corp has no effect on the direction of RWE AG i.e., RWE AG and Vistra Energy go up and down completely randomly.
Pair Corralation between RWE AG and Vistra Energy
Assuming the 90 days horizon RWE AG PK is expected to under-perform the Vistra Energy. But the pink sheet apears to be less risky and, when comparing its historical volatility, RWE AG PK is 1.92 times less risky than Vistra Energy. The pink sheet trades about -0.03 of its potential returns per unit of risk. The Vistra Energy Corp is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest 2,412 in Vistra Energy Corp on September 1, 2024 and sell it today you would earn a total of 13,572 from holding Vistra Energy Corp or generate 562.69% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
RWE AG PK vs. Vistra Energy Corp
Performance |
| Timeline |
| RWE AG PK |
| Vistra Energy Corp |
RWE AG and Vistra Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with RWE AG and Vistra Energy
The main advantage of trading using opposite RWE AG and Vistra Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if RWE AG position performs unexpectedly, Vistra Energy 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 Energy will offset losses from the drop in Vistra Energy's long position.The idea behind RWE AG PK and Vistra Energy Corp 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.| Vistra Energy vs. Pampa Energia SA | Vistra Energy vs. TransAlta Corp | Vistra Energy vs. Kenon Holdings | Vistra Energy vs. NRG Energy |
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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.
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