Correlation Between NRG Energy and First National
Can any of the company-specific risk be diversified away by investing in both NRG Energy and First National 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 First National into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NRG Energy and First National Energy, you can compare the effects of market volatilities on NRG Energy and First National 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 First National. Check out your portfolio center. Please also check ongoing floating volatility patterns of NRG Energy and First National.
Diversification Opportunities for NRG Energy and First National
-0.52 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between NRG and First is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding NRG Energy and First National Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First National Energy 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 First National. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First National Energy has no effect on the direction of NRG Energy i.e., NRG Energy and First National go up and down completely randomly.
Pair Corralation between NRG Energy and First National
Considering the 90-day investment horizon NRG Energy is expected to generate 32.72 times less return on investment than First National. But when comparing it to its historical volatility, NRG Energy is 47.35 times less risky than First National. It trades about 0.13 of its potential returns per unit of risk. First National Energy is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 56.00 in First National Energy on August 31, 2024 and sell it today you would lose (46.94) from holding First National Energy or give up 83.82% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 99.79% |
| Values | Daily Returns |
NRG Energy vs. First National Energy
Performance |
| Timeline |
| NRG Energy |
| First National Energy |
NRG Energy and First National Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with NRG Energy and First National
The main advantage of trading using opposite NRG Energy and First National positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NRG Energy position performs unexpectedly, First National 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 First National will offset losses from the drop in First National's long position.| NRG Energy vs. TransAlta Corp | NRG Energy vs. Kenon Holdings | NRG Energy vs. Pampa Energia SA | NRG Energy vs. AGL Energy |
| First National vs. Kontrol Technologies Corp | First National vs. PwrCor Inc | First National vs. 808 Renewable Energy | First National vs. Boralex |
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 Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
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