Correlation Between NRG Energy and Playtech Plc
Can any of the company-specific risk be diversified away by investing in both NRG Energy and Playtech Plc 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 Playtech Plc into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NRG Energy and Playtech plc, you can compare the effects of market volatilities on NRG Energy and Playtech Plc 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 Playtech Plc. Check out your portfolio center. Please also check ongoing floating volatility patterns of NRG Energy and Playtech Plc.
Diversification Opportunities for NRG Energy and Playtech Plc
-0.5 | Correlation Coefficient |
Very good diversification
The 3 months correlation between NRG and Playtech is -0.5. Overlapping area represents the amount of risk that can be diversified away by holding NRG Energy and Playtech plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Playtech plc 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 Playtech Plc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Playtech plc has no effect on the direction of NRG Energy i.e., NRG Energy and Playtech Plc go up and down completely randomly.
Pair Corralation between NRG Energy and Playtech Plc
Considering the 90-day investment horizon NRG Energy is expected to generate 1.05 times more return on investment than Playtech Plc. However, NRG Energy is 1.05 times more volatile than Playtech plc. It trades about 0.12 of its potential returns per unit of risk. Playtech plc is currently generating about 0.1 per unit of risk. If you would invest 5,218 in NRG Energy on November 3, 2024 and sell it today you would earn a total of 5,026 from holding NRG Energy or generate 96.32% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 99.6% |
| Values | Daily Returns |
NRG Energy vs. Playtech plc
Performance |
| Timeline |
| NRG Energy |
| Playtech plc |
NRG Energy and Playtech Plc Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with NRG Energy and Playtech Plc
The main advantage of trading using opposite NRG Energy and Playtech Plc positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NRG Energy position performs unexpectedly, Playtech Plc 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 Playtech Plc will offset losses from the drop in Playtech Plc's long position.| NRG Energy vs. TransAlta Corp | NRG Energy vs. Kenon Holdings | NRG Energy vs. Pampa Energia SA | NRG Energy vs. AGL Energy |
| Playtech Plc vs. Turning Point Brands | Playtech Plc vs. Universal | Playtech Plc vs. Altria Group | Playtech Plc vs. Japan Tobacco ADR |
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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.
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