Correlation Between POLENERGIA and Vistra Corp

Can any of the company-specific risk be diversified away by investing in both POLENERGIA and Vistra Corp 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 POLENERGIA and Vistra Corp into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between POLENERGIA SA ZY and Vistra Corp, you can compare the effects of market volatilities on POLENERGIA and Vistra Corp 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 POLENERGIA with a short position of Vistra Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of POLENERGIA and Vistra Corp.

Diversification Opportunities for POLENERGIA and Vistra Corp

-0.05

Correlation Coefficient

POLENERGIA  Vistra Corp

Good diversification

The 3 months correlation between POLENERGIA and Vistra is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding POLENERGIA SA ZY and Vistra Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vistra Corp and POLENERGIA 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 POLENERGIA SA ZY are associated (or correlated) with Vistra Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vistra Corp has no effect on the direction of POLENERGIA i.e., POLENERGIA and Vistra Corp go up and down completely randomly.

Pair Corralation between POLENERGIA and Vistra Corp

Assuming the 90 days horizon POLENERGIA is expected to generate 5.68 times less return on investment than Vistra Corp. But when comparing it to its historical volatility, POLENERGIA SA ZY is 2.05 times less risky than Vistra Corp. It trades about 0.06 of its potential returns per unit of risk. Vistra Corp is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  9,184  in Vistra Corp on September 20, 2024 and sell it today you would earn a total of  3,716  from holding Vistra Corp or generate 40.46% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

POLENERGIA SA ZY  vs.  Vistra Corp

POLENERGIA SA ZY

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in POLENERGIA SA ZY are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, POLENERGIA may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Vistra Corp

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Vistra Corp are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Vistra Corp reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with POLENERGIA and Vistra Corp

The main advantage of trading using opposite POLENERGIA and Vistra Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if POLENERGIA position performs unexpectedly, Vistra Corp 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 Corp will offset losses from the drop in Vistra Corp's long position.

The idea behind POLENERGIA SA ZY and Vistra 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.

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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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.