Correlation Between Summit Materials and Vistra Energy

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

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

Diversification Opportunities for Summit Materials and Vistra Energy

0.74

Correlation Coefficient

Summit Materials  Vistra Energy

Poor diversification

The 3 months correlation between Summit and Vistra is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Summit Materials 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 Summit Materials 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 Summit Materials 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 Summit Materials i.e., Summit Materials and Vistra Energy go up and down completely randomly.

Pair Corralation between Summit Materials and Vistra Energy

Considering the 90-day investment horizon Summit Materials is expected to generate 1.84 times less return on investment than Vistra Energy. But when comparing it to its historical volatility, Summit Materials is 2.06 times less risky than Vistra Energy. It trades about 0.23 of its potential returns per unit of risk. Vistra Energy Corp is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest  8,919  in Vistra Energy Corp on September 14, 2024 and sell it today you would earn a total of  5,589  from holding Vistra Energy Corp or generate 62.66% return on investment over 90 days.

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

Summit Materials  vs.  Vistra Energy Corp

Summit Materials

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Summit Materials are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Summit Materials displayed solid returns over the last few months and may actually be approaching a breakup point.

Vistra Energy Corp

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Vistra Energy Corp are ranked lower than 16 (%) 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 Summit Materials and Vistra Energy

The main advantage of trading using opposite Summit Materials and Vistra Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Summit Materials 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 Summit Materials 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.