Correlation Between Universal and NRG Energy
Can any of the company-specific risk be diversified away by investing in both Universal 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 Universal and NRG Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Universal and NRG Energy, you can compare the effects of market volatilities on Universal 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 Universal with a short position of NRG Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Universal and NRG Energy.
Diversification Opportunities for Universal and NRG Energy
0.52 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Universal and NRG is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Universal and NRG Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NRG Energy and Universal 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 Universal 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 Universal i.e., Universal and NRG Energy go up and down completely randomly.
Pair Corralation between Universal and NRG Energy
Considering the 90-day investment horizon Universal is expected to generate 18.94 times less return on investment than NRG Energy. But when comparing it to its historical volatility, Universal is 1.31 times less risky than NRG Energy. It trades about 0.01 of its potential returns per unit of risk. NRG Energy is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest 4,639 in NRG Energy on September 2, 2024 and sell it today you would earn a total of 5,522 from holding NRG Energy or generate 119.03% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Universal vs. NRG Energy
Performance |
| Timeline |
| Universal |
| NRG Energy |
Universal and NRG Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Universal and NRG Energy
The main advantage of trading using opposite Universal and NRG Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Universal 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.| Universal vs. Imperial Brands PLC | Universal vs. Japan Tobacco ADR | Universal vs. Philip Morris International | Universal vs. Turning Point Brands |
| 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.
Other Complementary Tools
| Insider Screener Find insiders across different sectors to evaluate their impact on performance | |
| Portfolio Dashboard Portfolio dashboard that provides centralized access to all your investments | |
| Stock Screener Find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook. | |
| AI Portfolio Architect Use AI to generate optimal portfolios and find profitable investment opportunities | |
| Portfolio Analyzer Portfolio analysis module that provides access to portfolio diagnostics and optimization engine |