Correlation Between NRG Energy and Orsted AS
Can any of the company-specific risk be diversified away by investing in both NRG Energy and Orsted AS 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 Orsted AS into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NRG Energy and Orsted AS, you can compare the effects of market volatilities on NRG Energy and Orsted AS 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 Orsted AS. Check out your portfolio center. Please also check ongoing floating volatility patterns of NRG Energy and Orsted AS.
Diversification Opportunities for NRG Energy and Orsted AS
-0.7 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between NRG and Orsted is -0.7. Overlapping area represents the amount of risk that can be diversified away by holding NRG Energy and Orsted AS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Orsted AS 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 Orsted AS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Orsted AS has no effect on the direction of NRG Energy i.e., NRG Energy and Orsted AS go up and down completely randomly.
Pair Corralation between NRG Energy and Orsted AS
Assuming the 90 days horizon NRG Energy is expected to generate 1.25 times more return on investment than Orsted AS. However, NRG Energy is 1.25 times more volatile than Orsted AS. It trades about -0.1 of its potential returns per unit of risk. Orsted AS is currently generating about -0.37 per unit of risk. If you would invest 9,062 in NRG Energy on September 25, 2024 and sell it today you would lose (470.00) from holding NRG Energy or give up 5.19% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
NRG Energy vs. Orsted AS
Performance |
| Timeline |
| NRG Energy |
| Orsted AS |
NRG Energy and Orsted AS Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with NRG Energy and Orsted AS
The main advantage of trading using opposite NRG Energy and Orsted AS positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NRG Energy position performs unexpectedly, Orsted AS 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 Orsted AS will offset losses from the drop in Orsted AS's long position.| NRG Energy vs. Orsted AS | NRG Energy vs. EDP Renovveis SA | NRG Energy vs. CGN Power Co | NRG Energy vs. Huaneng Power International |
| Orsted AS vs. EDP Renovveis SA | Orsted AS vs. CGN Power Co | Orsted AS vs. Huaneng Power International | Orsted AS vs. Power Assets Holdings |
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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..
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