Correlation Between NRG Energy and Vodka Brands
Can any of the company-specific risk be diversified away by investing in both NRG Energy and Vodka Brands 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 Vodka Brands into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NRG Energy and Vodka Brands Corp, you can compare the effects of market volatilities on NRG Energy and Vodka Brands 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 Vodka Brands. Check out your portfolio center. Please also check ongoing floating volatility patterns of NRG Energy and Vodka Brands.
Diversification Opportunities for NRG Energy and Vodka Brands
0.39 | Correlation Coefficient |
Weak diversification
The 3 months correlation between NRG and Vodka is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding NRG Energy and Vodka Brands Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vodka Brands Corp 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 Vodka Brands. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vodka Brands Corp has no effect on the direction of NRG Energy i.e., NRG Energy and Vodka Brands go up and down completely randomly.
Pair Corralation between NRG Energy and Vodka Brands
Considering the 90-day investment horizon NRG Energy is expected to generate 2.88 times less return on investment than Vodka Brands. In addition to that, NRG Energy is 1.03 times more volatile than Vodka Brands Corp. It trades about 0.07 of its total potential returns per unit of risk. Vodka Brands Corp is currently generating about 0.21 per unit of volatility. If you would invest 99.00 in Vodka Brands Corp on September 14, 2024 and sell it today you would earn a total of 13.00 from holding Vodka Brands Corp or generate 13.13% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
NRG Energy vs. Vodka Brands Corp
Performance |
| Timeline |
| NRG Energy |
| Vodka Brands Corp |
NRG Energy and Vodka Brands Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with NRG Energy and Vodka Brands
The main advantage of trading using opposite NRG Energy and Vodka Brands positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NRG Energy position performs unexpectedly, Vodka Brands 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 Vodka Brands will offset losses from the drop in Vodka Brands' long position.| NRG Energy vs. TransAlta Corp | NRG Energy vs. Kenon Holdings | NRG Energy vs. Pampa Energia SA | NRG Energy vs. AGL Energy |
| Vodka Brands vs. Brown Forman | Vodka Brands vs. Brown Forman | Vodka Brands vs. Eastside Distilling | Vodka Brands vs. Diageo PLC 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.
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