Correlation Between NRG Energy and Shenzhen Investment
Can any of the company-specific risk be diversified away by investing in both NRG Energy and Shenzhen Investment 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 Shenzhen Investment into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NRG Energy and Shenzhen Investment Holdings, you can compare the effects of market volatilities on NRG Energy and Shenzhen Investment 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 Shenzhen Investment. Check out your portfolio center. Please also check ongoing floating volatility patterns of NRG Energy and Shenzhen Investment.
Diversification Opportunities for NRG Energy and Shenzhen Investment
0.83 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between NRG and Shenzhen is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding NRG Energy and Shenzhen Investment Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shenzhen Investment 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 Shenzhen Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shenzhen Investment has no effect on the direction of NRG Energy i.e., NRG Energy and Shenzhen Investment go up and down completely randomly.
Pair Corralation between NRG Energy and Shenzhen Investment
Considering the 90-day investment horizon NRG Energy is expected to generate 3.04 times more return on investment than Shenzhen Investment. However, NRG Energy is 3.04 times more volatile than Shenzhen Investment Holdings. It trades about 0.2 of its potential returns per unit of risk. Shenzhen Investment Holdings is currently generating about 0.21 per unit of risk. If you would invest 8,999 in NRG Energy on September 1, 2024 and sell it today you would earn a total of 1,162 from holding NRG Energy or generate 12.91% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 95.45% |
| Values | Daily Returns |
NRG Energy vs. Shenzhen Investment Holdings
Performance |
| Timeline |
| NRG Energy |
| Shenzhen Investment |
NRG Energy and Shenzhen Investment Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with NRG Energy and Shenzhen Investment
The main advantage of trading using opposite NRG Energy and Shenzhen Investment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NRG Energy position performs unexpectedly, Shenzhen Investment 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 Shenzhen Investment will offset losses from the drop in Shenzhen Investment's long position.The idea behind NRG Energy and Shenzhen Investment 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.| Shenzhen Investment vs. Verra Mobility Corp | Shenzhen Investment vs. HUMANA INC | Shenzhen Investment vs. SCOR PK | Shenzhen Investment vs. Aquagold International |
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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..
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