Correlation Between NRG Energy and Molson Coors
Can any of the company-specific risk be diversified away by investing in both NRG Energy and Molson Coors 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 Molson Coors into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NRG Energy and Molson Coors Brewing, you can compare the effects of market volatilities on NRG Energy and Molson Coors 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 Molson Coors. Check out your portfolio center. Please also check ongoing floating volatility patterns of NRG Energy and Molson Coors.
Diversification Opportunities for NRG Energy and Molson Coors
0.62 | Correlation Coefficient |
Poor diversification
The 3 months correlation between NRG and Molson is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding NRG Energy and Molson Coors Brewing in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Molson Coors Brewing 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 Molson Coors. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Molson Coors Brewing has no effect on the direction of NRG Energy i.e., NRG Energy and Molson Coors go up and down completely randomly.
Pair Corralation between NRG Energy and Molson Coors
Considering the 90-day investment horizon NRG Energy is expected to generate 1.51 times more return on investment than Molson Coors. However, NRG Energy is 1.51 times more volatile than Molson Coors Brewing. It trades about 0.15 of its potential returns per unit of risk. Molson Coors Brewing is currently generating about 0.01 per unit of risk. If you would invest 4,639 in NRG Energy on September 2, 2024 and sell it today you would earn a total of 5,522 from holding NRG Energy or generate 119.03% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
NRG Energy vs. Molson Coors Brewing
Performance |
| Timeline |
| NRG Energy |
| Molson Coors Brewing |
NRG Energy and Molson Coors Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with NRG Energy and Molson Coors
The main advantage of trading using opposite NRG Energy and Molson Coors positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NRG Energy position performs unexpectedly, Molson Coors 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 Molson Coors will offset losses from the drop in Molson Coors' long position.| NRG Energy vs. TransAlta Corp | NRG Energy vs. Kenon Holdings | NRG Energy vs. Pampa Energia SA | NRG Energy vs. AGL Energy |
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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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