Correlation Between Vistra Energy and Talen Energy
Can any of the company-specific risk be diversified away by investing in both Vistra Energy and Talen 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 Talen 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 Talen Energy, you can compare the effects of market volatilities on Vistra Energy and Talen 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 Talen Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vistra Energy and Talen Energy.
Diversification Opportunities for Vistra Energy and Talen Energy
0.89 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Vistra and Talen is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Vistra Energy Corp and Talen Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Talen 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 Talen Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Talen Energy has no effect on the direction of Vistra Energy i.e., Vistra Energy and Talen Energy go up and down completely randomly.
Pair Corralation between Vistra Energy and Talen Energy
Considering the 90-day investment horizon Vistra Energy Corp is expected to generate 1.2 times more return on investment than Talen Energy. However, Vistra Energy is 1.2 times more volatile than Talen Energy. It trades about 0.17 of its potential returns per unit of risk. Talen Energy is currently generating about 0.18 per unit of risk. If you would invest 2,215 in Vistra Energy Corp on August 27, 2024 and sell it today you would earn a total of 13,977 from holding Vistra Energy Corp or generate 631.02% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 82.2% |
| Values | Daily Returns |
Vistra Energy Corp vs. Talen Energy
Performance |
| Timeline |
| Vistra Energy Corp |
| Talen Energy |
Vistra Energy and Talen Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vistra Energy and Talen Energy
The main advantage of trading using opposite Vistra Energy and Talen Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vistra Energy position performs unexpectedly, Talen 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 Talen Energy will offset losses from the drop in Talen 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 |
| Talen Energy vs. Afya | Talen Energy vs. Relx PLC ADR | Talen Energy vs. 51Talk Online Education | Talen Energy vs. WEBTOON Entertainment Common |
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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
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