Correlation Between 1st NRG and SDX Energy

Can any of the company-specific risk be diversified away by investing in both 1st NRG and SDX 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 1st NRG and SDX Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between 1st NRG Corp and SDX Energy plc, you can compare the effects of market volatilities on 1st NRG and SDX 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 1st NRG with a short position of SDX Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of 1st NRG and SDX Energy.

Diversification Opportunities for 1st NRG and SDX Energy

0.0

Correlation Coefficient

1st NRG  SDX Energy

Pay attention - limited upside

The 3 months correlation between 1st and SDX is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding 1st NRG Corp and SDX Energy plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SDX Energy plc and 1st NRG 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 1st NRG Corp are associated (or correlated) with SDX Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SDX Energy plc has no effect on the direction of 1st NRG i.e., 1st NRG and SDX Energy go up and down completely randomly.

Pair Corralation between 1st NRG and SDX Energy

Given the investment horizon of 90 days 1st NRG Corp is expected to under-perform the SDX Energy. But the pink sheet apears to be less risky and, when comparing its historical volatility, 1st NRG Corp is 1.96 times less risky than SDX Energy. The pink sheet trades about -0.13 of its potential returns per unit of risk. The SDX Energy plc is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  1.52  in SDX Energy plc on September 4, 2024 and sell it today you would lose (0.81) from holding SDX Energy plc or give up 53.29% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

1st NRG Corp  vs.  SDX Energy plc

1st NRG Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days 1st NRG Corp 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 basic indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

SDX Energy plc

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in SDX Energy plc are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak technical and fundamental indicators, SDX Energy reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with 1st NRG and SDX Energy

The main advantage of trading using opposite 1st NRG and SDX Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if 1st NRG position performs unexpectedly, SDX 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 SDX Energy will offset losses from the drop in SDX Energy's long position.

The idea behind 1st NRG Corp and SDX Energy plc 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.