Correlation Between ESSEX and Vistra Energy

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

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

Diversification Opportunities for ESSEX and Vistra Energy

-0.31

Correlation Coefficient

ESSEX  Vistra Energy

Very good diversification

The 3 months correlation between ESSEX and Vistra is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding ESSEX PORTFOLIO L 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 ESSEX 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 ESSEX PORTFOLIO L 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 ESSEX i.e., ESSEX and Vistra Energy go up and down completely randomly.

Pair Corralation between ESSEX and Vistra Energy

Assuming the 90 days trading horizon ESSEX PORTFOLIO L is expected to generate 0.06 times more return on investment than Vistra Energy. However, ESSEX PORTFOLIO L is 16.11 times less risky than Vistra Energy. It trades about 0.16 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  9,761  in ESSEX PORTFOLIO L on September 25, 2024 and sell it today you would earn a total of  65.00  from holding ESSEX PORTFOLIO L or generate 0.67% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	90.48%
Values	Daily Returns

ESSEX PORTFOLIO L  vs.  Vistra Energy Corp

ESSEX PORTFOLIO L

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ESSEX PORTFOLIO L has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, ESSEX is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Vistra Energy Corp

Risk-Adjusted Performance

7 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Vistra Energy Corp are ranked lower than 7 (%) 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 ESSEX and Vistra Energy

The main advantage of trading using opposite ESSEX and Vistra Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ESSEX 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 ESSEX PORTFOLIO L 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.