Correlation Between Universal and Vistra Energy
Can any of the company-specific risk be diversified away by investing in both Universal 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 Universal and Vistra Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Universal and Vistra Energy Corp, you can compare the effects of market volatilities on Universal 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 Universal with a short position of Vistra Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Universal and Vistra Energy.
Diversification Opportunities for Universal and Vistra Energy
0.47 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Universal and Vistra is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Universal 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 Universal 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 Universal 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 Universal i.e., Universal and Vistra Energy go up and down completely randomly.
Pair Corralation between Universal and Vistra Energy
Considering the 90-day investment horizon Universal is expected to generate 2.8 times less return on investment than Vistra Energy. But when comparing it to its historical volatility, Universal is 2.91 times less risky than Vistra Energy. It trades about 0.13 of its potential returns per unit of risk. Vistra Energy Corp is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest 9,154 in Vistra Energy Corp on September 3, 2024 and sell it today you would earn a total of 6,830 from holding Vistra Energy Corp or generate 74.61% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Universal vs. Vistra Energy Corp
Performance |
| Timeline |
| Universal |
| Vistra Energy Corp |
Universal and Vistra Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Universal and Vistra Energy
The main advantage of trading using opposite Universal and Vistra Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Universal 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.| Universal vs. Imperial Brands PLC | Universal vs. Japan Tobacco ADR | Universal vs. Philip Morris International | Universal vs. Turning Point Brands |
| 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.
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