Correlation Between Vistra Energy and RWE AG
Can any of the company-specific risk be diversified away by investing in both Vistra Energy and RWE AG 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 RWE AG 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 RWE AG PK, you can compare the effects of market volatilities on Vistra Energy and RWE AG 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 RWE AG. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vistra Energy and RWE AG.
Diversification Opportunities for Vistra Energy and RWE AG
-0.69 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Vistra and RWE is -0.69. Overlapping area represents the amount of risk that can be diversified away by holding Vistra Energy Corp and RWE AG PK in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RWE AG PK 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 RWE AG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RWE AG PK has no effect on the direction of Vistra Energy i.e., Vistra Energy and RWE AG go up and down completely randomly.
Pair Corralation between Vistra Energy and RWE AG
Considering the 90-day investment horizon Vistra Energy Corp is expected to generate 2.02 times more return on investment than RWE AG. However, Vistra Energy is 2.02 times more volatile than RWE AG PK. It trades about 0.19 of its potential returns per unit of risk. RWE AG PK is currently generating about 0.0 per unit of risk. If you would invest 3,208 in Vistra Energy Corp on August 25, 2024 and sell it today you would earn a total of 12,984 from holding Vistra Energy Corp or generate 404.74% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Vistra Energy Corp vs. RWE AG PK
Performance |
| Timeline |
| Vistra Energy Corp |
| RWE AG PK |
Vistra Energy and RWE AG Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vistra Energy and RWE AG
The main advantage of trading using opposite Vistra Energy and RWE AG positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vistra Energy position performs unexpectedly, RWE AG 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 RWE AG will offset losses from the drop in RWE AG's long position.| Vistra Energy vs. Pampa Energia SA | Vistra Energy vs. TransAlta Corp | Vistra Energy vs. Kenon Holdings | Vistra Energy vs. NRG Energy |
| RWE AG vs. TransAlta Corp | RWE AG vs. Pampa Energia SA | RWE AG vs. Vistra Energy Corp | RWE AG 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.
Other Complementary Tools
| Portfolio Dashboard Portfolio dashboard that provides centralized access to all your investments | |
| Pair Correlation Compare performance and examine fundamental relationship between any two equity instruments | |
| Price Exposure Probability Analyze equity upside and downside potential for a given time horizon across multiple markets | |
| Balance Of Power Check stock momentum by analyzing Balance Of Power indicator and other technical ratios | |
| Commodity Channel Use Commodity Channel Index to analyze current equity momentum |