Correlation Between GE Vernova and NRG Energy
Can any of the company-specific risk be diversified away by investing in both GE Vernova 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 GE Vernova and NRG Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between GE Vernova LLC and NRG Energy, you can compare the effects of market volatilities on GE Vernova 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 GE Vernova with a short position of NRG Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of GE Vernova and NRG Energy.
Diversification Opportunities for GE Vernova and NRG Energy
0.82 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between GEV and NRG is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding GE Vernova LLC and NRG Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NRG Energy and GE Vernova 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 GE Vernova LLC 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 GE Vernova i.e., GE Vernova and NRG Energy go up and down completely randomly.
Pair Corralation between GE Vernova and NRG Energy
Considering the 90-day investment horizon GE Vernova LLC is expected to generate 1.65 times more return on investment than NRG Energy. However, GE Vernova is 1.65 times more volatile than NRG Energy. It trades about 0.27 of its potential returns per unit of risk. NRG Energy is currently generating about 0.23 per unit of risk. If you would invest 29,354 in GE Vernova LLC on August 26, 2024 and sell it today you would earn a total of 5,562 from holding GE Vernova LLC or generate 18.95% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
GE Vernova LLC vs. NRG Energy
Performance |
| Timeline |
| GE Vernova LLC |
| NRG Energy |
GE Vernova and NRG Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GE Vernova and NRG Energy
The main advantage of trading using opposite GE Vernova and NRG Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GE Vernova 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.| GE Vernova vs. Kaltura | GE Vernova vs. Paiute Oil Mining | GE Vernova vs. FiscalNote Holdings | GE Vernova vs. Perseus Mining Limited |
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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.
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