Correlation Between Grocery Outlet and NRG Energy
Can any of the company-specific risk be diversified away by investing in both Grocery Outlet 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 Grocery Outlet and NRG Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Grocery Outlet Holding and NRG Energy, you can compare the effects of market volatilities on Grocery Outlet 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 Grocery Outlet with a short position of NRG Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Grocery Outlet and NRG Energy.
Diversification Opportunities for Grocery Outlet and NRG Energy
0.35 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Grocery and NRG is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding Grocery Outlet Holding and NRG Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NRG Energy and Grocery Outlet 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 Grocery Outlet Holding 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 Grocery Outlet i.e., Grocery Outlet and NRG Energy go up and down completely randomly.
Pair Corralation between Grocery Outlet and NRG Energy
Allowing for the 90-day total investment horizon Grocery Outlet Holding is expected to under-perform the NRG Energy. In addition to that, Grocery Outlet is 1.21 times more volatile than NRG Energy. It trades about -0.02 of its total potential returns per unit of risk. NRG Energy is currently generating about 0.13 per unit of volatility. If you would invest 3,132 in NRG Energy on September 3, 2024 and sell it today you would earn a total of 7,029 from holding NRG Energy or generate 224.43% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Grocery Outlet Holding vs. NRG Energy
Performance |
| Timeline |
| Grocery Outlet Holding |
| NRG Energy |
Grocery Outlet and NRG Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Grocery Outlet and NRG Energy
The main advantage of trading using opposite Grocery Outlet and NRG Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Grocery Outlet 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.| Grocery Outlet vs. Natural Grocers by | Grocery Outlet vs. Village Super Market | Grocery Outlet vs. Ingles Markets Incorporated | Grocery Outlet vs. Ocado Group plc |
| 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
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