Correlation Between NRG Energy and EDP Renováveis
Can any of the company-specific risk be diversified away by investing in both NRG Energy and EDP Renováveis 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 EDP Renováveis into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NRG Energy and EDP Renovveis SA, you can compare the effects of market volatilities on NRG Energy and EDP Renováveis 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 EDP Renováveis. Check out your portfolio center. Please also check ongoing floating volatility patterns of NRG Energy and EDP Renováveis.
Diversification Opportunities for NRG Energy and EDP Renováveis
-0.8 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between NRG and EDP is -0.8. Overlapping area represents the amount of risk that can be diversified away by holding NRG Energy and EDP Renovveis SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EDP Renovveis SA 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 EDP Renováveis. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EDP Renovveis SA has no effect on the direction of NRG Energy i.e., NRG Energy and EDP Renováveis go up and down completely randomly.
Pair Corralation between NRG Energy and EDP Renováveis
Assuming the 90 days horizon NRG Energy is expected to generate 1.15 times more return on investment than EDP Renováveis. However, NRG Energy is 1.15 times more volatile than EDP Renovveis SA. It trades about 0.09 of its potential returns per unit of risk. EDP Renovveis SA is currently generating about -0.04 per unit of risk. If you would invest 7,218 in NRG Energy on September 3, 2024 and sell it today you would earn a total of 2,482 from holding NRG Energy or generate 34.39% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
NRG Energy vs. EDP Renovveis SA
Performance |
| Timeline |
| NRG Energy |
| EDP Renovveis SA |
NRG Energy and EDP Renováveis Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with NRG Energy and EDP Renováveis
The main advantage of trading using opposite NRG Energy and EDP Renováveis positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NRG Energy position performs unexpectedly, EDP Renováveis 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 EDP Renováveis will offset losses from the drop in EDP Renováveis' long position.| NRG Energy vs. EDP Renovveis SA | NRG Energy vs. Superior Plus Corp | NRG Energy vs. NMI Holdings | NRG Energy vs. Origin Agritech |
| EDP Renováveis vs. MTI WIRELESS EDGE | EDP Renováveis vs. NorAm Drilling AS | EDP Renováveis vs. WillScot Mobile Mini | EDP Renováveis vs. SPORT LISBOA E |
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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.
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