Correlation Between NRG Energy and Valens
Can any of the company-specific risk be diversified away by investing in both NRG Energy and Valens 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 Valens into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NRG Energy and Valens, you can compare the effects of market volatilities on NRG Energy and Valens 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 Valens. Check out your portfolio center. Please also check ongoing floating volatility patterns of NRG Energy and Valens.
Diversification Opportunities for NRG Energy and Valens
-0.22 | Correlation Coefficient |
Very good diversification
The 3 months correlation between NRG and Valens is -0.22. Overlapping area represents the amount of risk that can be diversified away by holding NRG Energy and Valens in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Valens 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 Valens. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Valens has no effect on the direction of NRG Energy i.e., NRG Energy and Valens go up and down completely randomly.
Pair Corralation between NRG Energy and Valens
Considering the 90-day investment horizon NRG Energy is expected to generate 0.54 times more return on investment than Valens. However, NRG Energy is 1.84 times less risky than Valens. It trades about 0.12 of its potential returns per unit of risk. Valens is currently generating about -0.04 per unit of risk. If you would invest 3,251 in NRG Energy on August 27, 2024 and sell it today you would earn a total of 6,297 from holding NRG Energy or generate 193.69% 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. Valens
Performance |
| Timeline |
| NRG Energy |
| Valens |
NRG Energy and Valens Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with NRG Energy and Valens
The main advantage of trading using opposite NRG Energy and Valens positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NRG Energy position performs unexpectedly, Valens 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 Valens will offset losses from the drop in Valens' long position.| NRG Energy vs. TransAlta Corp | NRG Energy vs. Kenon Holdings | NRG Energy vs. Pampa Energia SA | NRG Energy vs. AGL Energy |
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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.
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