Correlation Between NRG Energy and Nomura Holdings
Can any of the company-specific risk be diversified away by investing in both NRG Energy and Nomura 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 Nomura 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 Nomura Holdings ADR, you can compare the effects of market volatilities on NRG Energy and Nomura 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 Nomura Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of NRG Energy and Nomura Holdings.
Diversification Opportunities for NRG Energy and Nomura Holdings
0.41 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between NRG and Nomura is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding NRG Energy and Nomura Holdings ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nomura Holdings ADR 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 Nomura Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nomura Holdings ADR has no effect on the direction of NRG Energy i.e., NRG Energy and Nomura Holdings go up and down completely randomly.
Pair Corralation between NRG Energy and Nomura Holdings
Considering the 90-day investment horizon NRG Energy is expected to generate 1.25 times less return on investment than Nomura Holdings. In addition to that, NRG Energy is 1.64 times more volatile than Nomura Holdings ADR. It trades about 0.2 of its total potential returns per unit of risk. Nomura Holdings ADR is currently generating about 0.42 per unit of volatility. If you would invest 518.00 in Nomura Holdings ADR on September 1, 2024 and sell it today you would earn a total of 90.00 from holding Nomura Holdings ADR or generate 17.37% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
NRG Energy vs. Nomura Holdings ADR
Performance |
| Timeline |
| NRG Energy |
| Nomura Holdings ADR |
NRG Energy and Nomura Holdings Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with NRG Energy and Nomura Holdings
The main advantage of trading using opposite NRG Energy and Nomura Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NRG Energy position performs unexpectedly, Nomura 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 Nomura Holdings will offset losses from the drop in Nomura Holdings' long position.| NRG Energy vs. Pampa Energia SA | NRG Energy vs. TransAlta Corp | NRG Energy vs. Kenon Holdings | NRG Energy vs. Power Assets Holdings |
| Nomura Holdings vs. Perella Weinberg Partners | Nomura Holdings vs. Oppenheimer Holdings | Nomura Holdings vs. Stifel Financial Corp | Nomura Holdings vs. Piper Sandler Companies |
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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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