Correlation Between Antero Midstream and NRG Energy
Can any of the company-specific risk be diversified away by investing in both Antero Midstream and NRG 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 Antero Midstream and NRG Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Antero Midstream Partners and NRG Energy, you can compare the effects of market volatilities on Antero Midstream and NRG 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 Antero Midstream with a short position of NRG Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Antero Midstream and NRG Energy.
Diversification Opportunities for Antero Midstream and NRG Energy
0.86 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Antero and NRG is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Antero Midstream Partners and NRG Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NRG Energy and Antero Midstream 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 Antero Midstream Partners are associated (or correlated) with NRG Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NRG Energy has no effect on the direction of Antero Midstream i.e., Antero Midstream and NRG Energy go up and down completely randomly.
Pair Corralation between Antero Midstream and NRG Energy
Allowing for the 90-day total investment horizon Antero Midstream is expected to generate 2.14 times less return on investment than NRG Energy. But when comparing it to its historical volatility, Antero Midstream Partners is 2.47 times less risky than NRG Energy. It trades about 0.43 of its potential returns per unit of risk. NRG Energy is currently generating about 0.37 of returns per unit of risk over similar time horizon. If you would invest 9,284 in NRG Energy on October 26, 2024 and sell it today you would earn a total of 1,770 from holding NRG Energy or generate 19.07% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Antero Midstream Partners vs. NRG Energy
Performance |
| Timeline |
| Antero Midstream Partners |
| NRG Energy |
Antero Midstream and NRG Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Antero Midstream and NRG Energy
The main advantage of trading using opposite Antero Midstream and NRG Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Antero Midstream position performs unexpectedly, NRG 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 NRG Energy will offset losses from the drop in NRG Energy's long position.| Antero Midstream vs. EnLink Midstream LLC | Antero Midstream vs. Western Midstream Partners | Antero Midstream vs. Plains GP Holdings | Antero Midstream vs. Plains All American |
| NRG Energy vs. TransAlta Corp | NRG Energy vs. Kenon Holdings | NRG Energy vs. Pampa Energia SA | NRG Energy vs. AGL Energy |
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 the Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.
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