Correlation Between OtelloASA and Vistra Corp

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

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

Diversification Opportunities for OtelloASA and Vistra Corp

-0.47

Correlation Coefficient

OtelloASA  Vistra Corp

Very good diversification

The 3 months correlation between OtelloASA and Vistra is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding Otello ASA and Vistra Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vistra Corp and OtelloASA 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 Otello ASA 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 OtelloASA i.e., OtelloASA and Vistra Corp go up and down completely randomly.

Pair Corralation between OtelloASA and Vistra Corp

Assuming the 90 days horizon Otello ASA is expected to under-perform the Vistra Corp. But the stock apears to be less risky and, when comparing its historical volatility, Otello ASA is 2.45 times less risky than Vistra Corp. The stock trades about -0.1 of its potential returns per unit of risk. The Vistra Corp is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest  8,176  in Vistra Corp on September 19, 2024 and sell it today you would earn a total of  4,724  from holding Vistra Corp or generate 57.78% return on investment over 90 days.

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

Otello ASA  vs.  Vistra Corp

Otello ASA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Otello ASA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains 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 OtelloASA and Vistra Corp

The main advantage of trading using opposite OtelloASA and Vistra Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if OtelloASA 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 Otello ASA 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.