Correlation Between Barings BDC and Vistra Energy

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

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

Diversification Opportunities for Barings BDC and Vistra Energy

0.67

Correlation Coefficient

Barings BDC  Vistra Energy

Poor diversification

The 3 months correlation between Barings and Vistra is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Barings BDC 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 Barings BDC 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 Barings BDC 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 Barings BDC i.e., Barings BDC and Vistra Energy go up and down completely randomly.

Pair Corralation between Barings BDC and Vistra Energy

Given the investment horizon of 90 days Barings BDC is expected to generate 0.27 times more return on investment than Vistra Energy. However, Barings BDC is 3.76 times less risky than Vistra Energy. It trades about -0.27 of its potential returns per unit of risk. Vistra Energy Corp is currently generating about -0.08 per unit of risk. If you would invest  994.00  in Barings BDC on September 26, 2024 and sell it today you would lose (52.00) from holding Barings BDC or give up 5.23% of portfolio value over 90 days.

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

Barings BDC  vs.  Vistra Energy Corp

Barings BDC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Barings BDC has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound fundamental indicators, Barings BDC is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

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 Barings BDC and Vistra Energy

The main advantage of trading using opposite Barings BDC and Vistra Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Barings BDC 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 Barings BDC 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.