Correlation Between ASML Holding and NRG Energy
Can any of the company-specific risk be diversified away by investing in both ASML Holding 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 ASML Holding and NRG Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ASML Holding NV and NRG Energy, you can compare the effects of market volatilities on ASML Holding 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 ASML Holding with a short position of NRG Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of ASML Holding and NRG Energy.
Diversification Opportunities for ASML Holding and NRG Energy
-0.44 | Correlation Coefficient |
Very good diversification
The 3 months correlation between ASML and NRG is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding ASML Holding NV and NRG Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NRG Energy and ASML Holding 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 ASML Holding NV 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 ASML Holding i.e., ASML Holding and NRG Energy go up and down completely randomly.
Pair Corralation between ASML Holding and NRG Energy
Given the investment horizon of 90 days ASML Holding is expected to generate 7.7 times less return on investment than NRG Energy. In addition to that, ASML Holding is 1.36 times more volatile than NRG Energy. It trades about 0.01 of its total potential returns per unit of risk. NRG Energy is currently generating about 0.15 per unit of volatility. If you would invest 4,571 in NRG Energy on August 24, 2024 and sell it today you would earn a total of 5,118 from holding NRG Energy or generate 111.97% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
ASML Holding NV vs. NRG Energy
Performance |
| Timeline |
| ASML Holding NV |
| NRG Energy |
ASML Holding and NRG Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ASML Holding and NRG Energy
The main advantage of trading using opposite ASML Holding and NRG Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ASML Holding 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.| ASML Holding vs. Applied Materials | ASML Holding vs. KLA Tencor | ASML Holding vs. Axcelis Technologies | ASML Holding vs. Teradyne |
| 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.
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