Correlation Between Bread Financial and NRG Energy,

Can any of the company-specific risk be diversified away by investing in both Bread Financial 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 Bread Financial and NRG Energy, into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Bread Financial Holdings and NRG Energy,, you can compare the effects of market volatilities on Bread Financial 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 Bread Financial with a short position of NRG Energy,. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bread Financial and NRG Energy,.

Diversification Opportunities for Bread Financial and NRG Energy,

0.88

Correlation Coefficient

Bread Financial  NRG Energy,

Very poor diversification

The 3 months correlation between Bread and NRG is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Bread Financial Holdings and NRG Energy, in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NRG Energy, and Bread Financial 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 Bread Financial Holdings 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 Bread Financial i.e., Bread Financial and NRG Energy, go up and down completely randomly.

Pair Corralation between Bread Financial and NRG Energy,

Assuming the 90 days trading horizon Bread Financial Holdings is expected to generate 0.5 times more return on investment than NRG Energy,. However, Bread Financial Holdings is 2.0 times less risky than NRG Energy,. It trades about 0.07 of its potential returns per unit of risk. NRG Energy, is currently generating about -0.12 per unit of risk. If you would invest  9,268  in Bread Financial Holdings on October 6, 2024 and sell it today you would earn a total of  160.00  from holding Bread Financial Holdings or generate 1.73% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	94.74%
Values	Daily Returns

Bread Financial Holdings  vs.  NRG Energy,

Bread Financial Holdings

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Bread Financial Holdings are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak essential indicators, Bread Financial sustained solid returns over the last few months and may actually be approaching a breakup point.

NRG Energy,

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in NRG Energy, are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, NRG Energy, may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Bread Financial and NRG Energy,

The main advantage of trading using opposite Bread Financial and NRG Energy, positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bread Financial 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.

The idea behind Bread Financial Holdings and NRG Energy, pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.