Correlation Between BANK CENTRAL and NRG ENERGY

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

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

Diversification Opportunities for BANK CENTRAL and NRG ENERGY

0.15

Correlation Coefficient

BANK CENTRAL  NRG ENERGY

Average diversification

The 3 months correlation between BANK and NRG is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding BANK CENTRAL ASIA and NRG ENERGY in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NRG ENERGY and BANK CENTRAL 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 BANK CENTRAL ASIA 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 BANK CENTRAL i.e., BANK CENTRAL and NRG ENERGY go up and down completely randomly.

Pair Corralation between BANK CENTRAL and NRG ENERGY

Assuming the 90 days trading horizon BANK CENTRAL ASIA is expected to under-perform the NRG ENERGY. But the stock apears to be less risky and, when comparing its historical volatility, BANK CENTRAL ASIA is 2.03 times less risky than NRG ENERGY. The stock trades about -0.17 of its potential returns per unit of risk. The NRG ENERGY is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  8,712  in NRG ENERGY on December 20, 2024 and sell it today you would earn a total of  456.00  from holding NRG ENERGY or generate 5.23% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

BANK CENTRAL ASIA  vs.  NRG ENERGY

BANK CENTRAL ASIA

Risk-Adjusted Performance

Very Weak

Over the last 90 days BANK CENTRAL ASIA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

NRG ENERGY

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in NRG ENERGY are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, NRG ENERGY may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with BANK CENTRAL and NRG ENERGY

The main advantage of trading using opposite BANK CENTRAL and NRG ENERGY positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BANK CENTRAL 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 BANK CENTRAL ASIA 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.

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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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.