Correlation Between Vistra Energy and NRG Energy
Can any of the company-specific risk be diversified away by investing in both Vistra Energy and NRG 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 Vistra Energy and NRG Energy 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 NRG Energy, you can compare the effects of market volatilities on Vistra Energy and NRG 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 Vistra Energy with a short position of NRG Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vistra Energy and NRG Energy.
Diversification Opportunities for Vistra Energy and NRG Energy
0.92 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Vistra and NRG is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Vistra Energy Corp and NRG Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NRG Energy 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 NRG Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NRG Energy has no effect on the direction of Vistra Energy i.e., Vistra Energy and NRG Energy go up and down completely randomly.
Pair Corralation between Vistra Energy and NRG Energy
Considering the 90-day investment horizon Vistra Energy Corp is expected to generate 1.34 times more return on investment than NRG Energy. However, Vistra Energy is 1.34 times more volatile than NRG Energy. It trades about 0.16 of its potential returns per unit of risk. NRG Energy is currently generating about 0.1 per unit of risk. If you would invest 2,242 in Vistra Energy Corp on August 24, 2024 and sell it today you would earn a total of 14,419 from holding Vistra Energy Corp or generate 643.13% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Vistra Energy Corp vs. NRG Energy
Performance |
| Timeline |
| Vistra Energy Corp |
| NRG Energy |
Vistra Energy and NRG Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vistra Energy and NRG Energy
The main advantage of trading using opposite Vistra Energy and NRG Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vistra Energy position performs unexpectedly, NRG 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 NRG Energy will offset losses from the drop in NRG Energy's long position.| Vistra Energy vs. Pampa Energia SA | Vistra Energy vs. TransAlta Corp | Vistra Energy vs. Kenon Holdings | Vistra Energy vs. NRG Energy |
| NRG Energy vs. TransAlta Corp | NRG Energy vs. Kenon Holdings | NRG Energy vs. Pampa Energia SA | NRG Energy vs. AGL 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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