Correlation Between Beauty Health and NRG Energy
Can any of the company-specific risk be diversified away by investing in both Beauty Health 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 Beauty Health and NRG Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Beauty Health Co and NRG Energy, you can compare the effects of market volatilities on Beauty Health 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 Beauty Health with a short position of NRG Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Beauty Health and NRG Energy.
Diversification Opportunities for Beauty Health and NRG Energy
-0.28 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Beauty and NRG is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding Beauty Health Co and NRG Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NRG Energy and Beauty Health 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 Beauty Health Co 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 Beauty Health i.e., Beauty Health and NRG Energy go up and down completely randomly.
Pair Corralation between Beauty Health and NRG Energy
Given the investment horizon of 90 days Beauty Health Co is expected to under-perform the NRG Energy. In addition to that, Beauty Health is 2.38 times more volatile than NRG Energy. It trades about 0.0 of its total potential returns per unit of risk. NRG Energy is currently generating about 0.07 per unit of volatility. If you would invest 7,788 in NRG Energy on September 25, 2024 and sell it today you would earn a total of 1,520 from holding NRG Energy or generate 19.52% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Beauty Health Co vs. NRG Energy
Performance |
| Timeline |
| Beauty Health |
| NRG Energy |
Beauty Health and NRG Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Beauty Health and NRG Energy
The main advantage of trading using opposite Beauty Health and NRG Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Beauty Health 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.| Beauty Health vs. Kimberly Clark | Beauty Health vs. Colgate Palmolive | Beauty Health vs. Procter Gamble | Beauty Health vs. The Clorox |
| 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.
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