Correlation Between Vistra Energy and Costco Wholesale

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Can any of the company-specific risk be diversified away by investing in both Vistra Energy and Costco Wholesale 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 Costco Wholesale 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 Costco Wholesale, you can compare the effects of market volatilities on Vistra Energy and Costco Wholesale 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 Costco Wholesale. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vistra Energy and Costco Wholesale.

Diversification Opportunities for Vistra Energy and Costco Wholesale

0.74
  Correlation Coefficient

Poor diversification

The 3 months correlation between Vistra and Costco is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Vistra Energy Corp and Costco Wholesale in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Costco Wholesale 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 Costco Wholesale. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Costco Wholesale has no effect on the direction of Vistra Energy i.e., Vistra Energy and Costco Wholesale go up and down completely randomly.

Pair Corralation between Vistra Energy and Costco Wholesale

Considering the 90-day investment horizon Vistra Energy Corp is expected to under-perform the Costco Wholesale. But the stock apears to be less risky and, when comparing its historical volatility, Vistra Energy Corp is 1.02 times less risky than Costco Wholesale. The stock trades about -0.35 of its potential returns per unit of risk. The Costco Wholesale is currently generating about -0.23 of returns per unit of risk over similar time horizon. If you would invest  51,890  in Costco Wholesale on July 5, 2022 and sell it today you would lose (4,663)  from holding Costco Wholesale or give up 8.99% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

Vistra Energy Corp  vs.  Costco Wholesale

 Performance (%) 
       Timeline  
Vistra Energy Corp 
Vistra Performance
0 of 100
Over the last 90 days Vistra Energy Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Vistra Energy is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Vistra Price Channel

Costco Wholesale 
Costco Performance
0 of 100
Over the last 90 days Costco Wholesale has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Costco Wholesale is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Costco Price Channel

Vistra Energy and Costco Wholesale Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Vistra Energy and Costco Wholesale

The main advantage of trading using opposite Vistra Energy and Costco Wholesale positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vistra Energy position performs unexpectedly, Costco Wholesale 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 Costco Wholesale will offset losses from the drop in Costco Wholesale's long position.
Vistra Energy vs. Amazon Inc
The idea behind Vistra Energy Corp and Costco Wholesale 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.
Costco Wholesale vs. Amazon Inc
Check out your portfolio center. 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.

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