Correlation Between Vistra Energy and NETGEAR

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

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

Diversification Opportunities for Vistra Energy and NETGEAR

0.3

Correlation Coefficient

Vistra Energy  NETGEAR

Weak diversification

The 3 months correlation between Vistra and NETGEAR is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Vistra Energy Corp and NETGEAR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NETGEAR and Vistra 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 Vistra Energy Corp are associated (or correlated) with NETGEAR. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NETGEAR has no effect on the direction of Vistra Energy i.e., Vistra Energy and NETGEAR go up and down completely randomly.

Pair Corralation between Vistra Energy and NETGEAR

Considering the 90-day investment horizon Vistra Energy Corp is expected to generate 0.71 times more return on investment than NETGEAR. However, Vistra Energy Corp is 1.41 times less risky than NETGEAR. It trades about 0.12 of its potential returns per unit of risk. NETGEAR is currently generating about -0.22 per unit of risk. If you would invest  7,376  in Vistra Energy Corp on February 3, 2024 and sell it today you would earn a total of  611.00  from holding Vistra Energy Corp or generate 8.28% return on investment over 90 days.

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

Vistra Energy Corp  vs.  NETGEAR

Vistra Energy Corp

Risk-Adjusted Performance

29 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Vistra Energy Corp are ranked lower than 29 (%) 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.

NETGEAR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days NETGEAR has generated negative risk-adjusted returns adding no value to investors with long positions. Even with uncertain performance in the last few months, the Stock's technical and fundamental indicators remain relatively invariable which may send shares a bit higher in June 2024. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Pair Trading with Vistra Energy and NETGEAR

The main advantage of trading using opposite Vistra Energy and NETGEAR positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vistra Energy position performs unexpectedly, NETGEAR 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 NETGEAR will offset losses from the drop in NETGEAR's long position.

The idea behind Vistra Energy Corp and NETGEAR 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..