Correlation Between NRG Energy and Northland Power
Can any of the company-specific risk be diversified away by investing in both NRG Energy and Northland Power 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 NRG Energy and Northland Power into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NRG Energy and Northland Power, you can compare the effects of market volatilities on NRG Energy and Northland Power 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 NRG Energy with a short position of Northland Power. Check out your portfolio center. Please also check ongoing floating volatility patterns of NRG Energy and Northland Power.
Diversification Opportunities for NRG Energy and Northland Power
-0.52 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between NRG and Northland is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding NRG Energy and Northland Power in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Northland Power and NRG 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 NRG Energy are associated (or correlated) with Northland Power. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Northland Power has no effect on the direction of NRG Energy i.e., NRG Energy and Northland Power go up and down completely randomly.
Pair Corralation between NRG Energy and Northland Power
Assuming the 90 days horizon NRG Energy is expected to generate 0.78 times more return on investment than Northland Power. However, NRG Energy is 1.28 times less risky than Northland Power. It trades about 0.13 of its potential returns per unit of risk. Northland Power is currently generating about 0.0 per unit of risk. If you would invest 4,233 in NRG Energy on September 14, 2024 and sell it today you would earn a total of 4,631 from holding NRG Energy or generate 109.4% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
NRG Energy vs. Northland Power
Performance |
| Timeline |
| NRG Energy |
| Northland Power |
NRG Energy and Northland Power Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with NRG Energy and Northland Power
The main advantage of trading using opposite NRG Energy and Northland Power positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NRG Energy position performs unexpectedly, Northland Power 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 Northland Power will offset losses from the drop in Northland Power's long position.| NRG Energy vs. Superior Plus Corp | NRG Energy vs. SIVERS SEMICONDUCTORS AB | NRG Energy vs. Norsk Hydro ASA | NRG Energy vs. Reliance Steel Aluminum |
| Northland Power vs. Dairy Farm International | Northland Power vs. SIEM OFFSHORE NEW | Northland Power vs. Martin Marietta Materials | Northland Power vs. Rayonier Advanced Materials |
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.
Other Complementary Tools
| Bollinger Bands Use Bollinger Bands indicator to analyze target price for a given investing horizon | |
| Correlation Analysis Reduce portfolio risk simply by holding instruments which are not perfectly correlated | |
| Analyst Advice Analyst recommendations and target price estimates broken down by several categories | |
| Insider Screener Find insiders across different sectors to evaluate their impact on performance | |
| Balance Of Power Check stock momentum by analyzing Balance Of Power indicator and other technical ratios |