Correlation Between Reliance Steel and NRG Energy
Can any of the company-specific risk be diversified away by investing in both Reliance Steel and NRG Energy 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 Reliance Steel and NRG Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Reliance Steel Aluminum and NRG Energy, you can compare the effects of market volatilities on Reliance Steel and NRG Energy 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 Reliance Steel with a short position of NRG Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Reliance Steel and NRG Energy.
Diversification Opportunities for Reliance Steel and NRG Energy
0.15 | Correlation Coefficient |
Average diversification
The 3 months correlation between Reliance and NRG is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding Reliance Steel Aluminum and NRG Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NRG Energy and Reliance Steel 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 Reliance Steel Aluminum are associated (or correlated) with NRG Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NRG Energy has no effect on the direction of Reliance Steel i.e., Reliance Steel and NRG Energy go up and down completely randomly.
Pair Corralation between Reliance Steel and NRG Energy
Assuming the 90 days horizon Reliance Steel is expected to generate 4.87 times less return on investment than NRG Energy. But when comparing it to its historical volatility, Reliance Steel Aluminum is 1.33 times less risky than NRG Energy. It trades about 0.03 of its potential returns per unit of risk. NRG Energy is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest 2,733 in NRG Energy on December 4, 2024 and sell it today you would earn a total of 7,352 from holding NRG Energy or generate 269.01% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 99.8% |
| Values | Daily Returns |
Reliance Steel Aluminum vs. NRG Energy
Performance |
| Timeline |
| Reliance Steel Aluminum |
| NRG Energy |
Reliance Steel and NRG Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Reliance Steel and NRG Energy
The main advantage of trading using opposite Reliance Steel and NRG Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Reliance Steel position performs unexpectedly, NRG Energy 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 NRG Energy will offset losses from the drop in NRG Energy's long position.| Reliance Steel vs. Computer And Technologies | Reliance Steel vs. CSSC Offshore Marine | Reliance Steel vs. Kaufman Broad SA | Reliance Steel vs. Rocket Internet SE |
| NRG Energy vs. Motorcar Parts of | NRG Energy vs. CARSALESCOM | NRG Energy vs. Commercial Vehicle Group | NRG Energy vs. Japan Medical Dynamic |
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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.
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