Correlation Between NRG Energy and ASML Holding
Can any of the company-specific risk be diversified away by investing in both NRG Energy and ASML Holding 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 ASML Holding into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NRG Energy and ASML Holding NV, you can compare the effects of market volatilities on NRG Energy and ASML Holding 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 ASML Holding. Check out your portfolio center. Please also check ongoing floating volatility patterns of NRG Energy and ASML Holding.
Diversification Opportunities for NRG Energy and ASML Holding
-0.45 | Correlation Coefficient |
Very good diversification
The 3 months correlation between NRG and ASML is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding NRG Energy and ASML Holding NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ASML Holding NV 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 ASML Holding. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ASML Holding NV has no effect on the direction of NRG Energy i.e., NRG Energy and ASML Holding go up and down completely randomly.
Pair Corralation between NRG Energy and ASML Holding
Considering the 90-day investment horizon NRG Energy is expected to generate 0.79 times more return on investment than ASML Holding. However, NRG Energy is 1.27 times less risky than ASML Holding. It trades about 0.12 of its potential returns per unit of risk. ASML Holding NV is currently generating about 0.02 per unit of risk. If you would invest 3,251 in NRG Energy on August 27, 2024 and sell it today you would earn a total of 6,297 from holding NRG Energy or generate 193.69% 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. ASML Holding NV
Performance |
| Timeline |
| NRG Energy |
| ASML Holding NV |
NRG Energy and ASML Holding Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with NRG Energy and ASML Holding
The main advantage of trading using opposite NRG Energy and ASML Holding positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NRG Energy position performs unexpectedly, ASML Holding 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 ASML Holding will offset losses from the drop in ASML Holding's long position.| NRG Energy vs. TransAlta Corp | NRG Energy vs. Kenon Holdings | NRG Energy vs. Pampa Energia SA | NRG Energy vs. AGL Energy |
| ASML Holding vs. Applied Materials | ASML Holding vs. KLA Tencor | ASML Holding vs. Axcelis Technologies | ASML Holding vs. Teradyne |
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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
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