Correlation Between NRG Energy and BAIYU Holdings

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Can any of the company-specific risk be diversified away by investing in both NRG Energy and BAIYU Holdings 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 BAIYU Holdings into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NRG Energy and BAIYU Holdings, you can compare the effects of market volatilities on NRG Energy and BAIYU Holdings 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 BAIYU Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of NRG Energy and BAIYU Holdings.

Diversification Opportunities for NRG Energy and BAIYU Holdings

-0.73
  Correlation Coefficient

Pay attention - limited upside

The 3 months correlation between NRG and BAIYU is -0.73. Overlapping area represents the amount of risk that can be diversified away by holding NRG Energy and BAIYU Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BAIYU Holdings 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 BAIYU Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BAIYU Holdings has no effect on the direction of NRG Energy i.e., NRG Energy and BAIYU Holdings go up and down completely randomly.

Pair Corralation between NRG Energy and BAIYU Holdings

Considering the 90-day investment horizon NRG Energy is expected to generate 0.23 times more return on investment than BAIYU Holdings. However, NRG Energy is 4.37 times less risky than BAIYU Holdings. It trades about 0.13 of its potential returns per unit of risk. BAIYU Holdings is currently generating about -0.08 per unit of risk. If you would invest  2,989  in NRG Energy on September 12, 2024 and sell it today you would earn a total of  6,384  from holding NRG Energy or generate 213.58% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthWeak
Accuracy97.37%
ValuesDaily Returns

NRG Energy  vs.  BAIYU Holdings

 Performance 
       Timeline  
NRG Energy 

Risk-Adjusted Performance

9 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in NRG Energy are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, NRG Energy reported solid returns over the last few months and may actually be approaching a breakup point.
BAIYU Holdings 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days BAIYU Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

NRG Energy and BAIYU Holdings Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with NRG Energy and BAIYU Holdings

The main advantage of trading using opposite NRG Energy and BAIYU Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NRG Energy position performs unexpectedly, BAIYU Holdings 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 BAIYU Holdings will offset losses from the drop in BAIYU Holdings' long position.
The idea behind NRG Energy and BAIYU Holdings pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
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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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.

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