Correlation Between NRG Energy and Union Electric
Can any of the company-specific risk be diversified away by investing in both NRG Energy and Union Electric 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 Union Electric into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NRG Energy and Union Electric, you can compare the effects of market volatilities on NRG Energy and Union Electric 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 Union Electric. Check out your portfolio center. Please also check ongoing floating volatility patterns of NRG Energy and Union Electric.
Diversification Opportunities for NRG Energy and Union Electric
-0.01 | Correlation Coefficient |
Good diversification
The 3 months correlation between NRG and Union is -0.01. Overlapping area represents the amount of risk that can be diversified away by holding NRG Energy and Union Electric in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Union Electric 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 Union Electric. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Union Electric has no effect on the direction of NRG Energy i.e., NRG Energy and Union Electric go up and down completely randomly.
Pair Corralation between NRG Energy and Union Electric
Considering the 90-day investment horizon NRG Energy is expected to generate 0.87 times more return on investment than Union Electric. However, NRG Energy is 1.14 times less risky than Union Electric. It trades about 0.16 of its potential returns per unit of risk. Union Electric is currently generating about 0.1 per unit of risk. If you would invest 7,877 in NRG Energy on September 4, 2024 and sell it today you would earn a total of 2,063 from holding NRG Energy or generate 26.19% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
NRG Energy vs. Union Electric
Performance |
| Timeline |
| NRG Energy |
| Union Electric |
NRG Energy and Union Electric Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with NRG Energy and Union Electric
The main advantage of trading using opposite NRG Energy and Union Electric positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NRG Energy position performs unexpectedly, Union Electric 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 Union Electric will offset losses from the drop in Union Electric's long position.| NRG Energy vs. TransAlta Corp | NRG Energy vs. Kenon Holdings | NRG Energy vs. Pampa Energia SA | NRG Energy vs. AGL Energy |
| Union Electric vs. Afya | Union Electric vs. NRG Energy | Union Electric vs. CenterPoint Energy | Union Electric vs. Skillful Craftsman Education |
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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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