Correlation Between AmTrust Financial and Vistra Energy

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

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

Diversification Opportunities for AmTrust Financial and Vistra Energy

0.66

Correlation Coefficient

AmTrust Financial  Vistra Energy

Poor diversification

The 3 months correlation between AmTrust and Vistra is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding AmTrust Financial Services 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 AmTrust Financial 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 AmTrust Financial Services 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 AmTrust Financial i.e., AmTrust Financial and Vistra Energy go up and down completely randomly.

Pair Corralation between AmTrust Financial and Vistra Energy

Assuming the 90 days horizon AmTrust Financial is expected to generate 17.67 times less return on investment than Vistra Energy. But when comparing it to its historical volatility, AmTrust Financial Services is 1.67 times less risky than Vistra Energy. It trades about 0.01 of its potential returns per unit of risk. Vistra Energy Corp is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  11,398  in Vistra Energy Corp on September 26, 2024 and sell it today you would earn a total of  2,938  from holding Vistra Energy Corp or generate 25.78% return on investment over 90 days.

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

AmTrust Financial Services  vs.  Vistra Energy Corp

AmTrust Financial

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days AmTrust Financial Services has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable forward indicators, AmTrust Financial is not utilizing all of its potentials. The recent stock price agitation, may contribute to short-term losses for the retail investors.

Vistra Energy Corp

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Vistra Energy Corp are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating basic indicators, Vistra Energy unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with AmTrust Financial and Vistra Energy

The main advantage of trading using opposite AmTrust Financial and Vistra Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AmTrust Financial 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.

The idea behind AmTrust Financial Services and Vistra Energy 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.