Correlation Between Lundin Energy and Vistra Corp

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

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

Diversification Opportunities for Lundin Energy and Vistra Corp

-0.81

Correlation Coefficient

Lundin Energy  Vistra Corp

Pay attention - limited upside

The 3 months correlation between Lundin and Vistra is -0.81. Overlapping area represents the amount of risk that can be diversified away by holding Lundin Energy AB and Vistra Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vistra Corp and Lundin 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 Lundin Energy AB 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 Lundin Energy i.e., Lundin Energy and Vistra Corp go up and down completely randomly.

Pair Corralation between Lundin Energy and Vistra Corp

Assuming the 90 days horizon Lundin Energy AB is expected to under-perform the Vistra Corp. In addition to that, Lundin Energy is 1.13 times more volatile than Vistra Corp. It trades about -0.03 of its total potential returns per unit of risk. Vistra Corp is currently generating about 0.12 per unit of volatility. If you would invest  2,128  in Vistra Corp on September 19, 2024 and sell it today you would earn a total of  10,772  from holding Vistra Corp or generate 506.2% return on investment over 90 days.

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

Lundin Energy AB  vs.  Vistra Corp

Lundin Energy AB

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Lundin Energy AB has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Vistra Corp

Risk-Adjusted Performance

15 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Vistra Corp are ranked lower than 15 (%) 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 Lundin Energy and Vistra Corp

The main advantage of trading using opposite Lundin Energy and Vistra Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lundin Energy 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 Lundin Energy AB 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.