Correlation Between Naturgy Energy and CenterPoint Energy

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

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

Diversification Opportunities for Naturgy Energy and CenterPoint Energy

0.6

Correlation Coefficient

Naturgy Energy  CenterPoint Energy

Poor diversification

The 3 months correlation between Naturgy and CenterPoint is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Naturgy Energy Group and CenterPoint Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CenterPoint Energy and Naturgy Energy 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 Naturgy Energy Group are associated (or correlated) with CenterPoint Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CenterPoint Energy has no effect on the direction of Naturgy Energy i.e., Naturgy Energy and CenterPoint Energy go up and down completely randomly.

Pair Corralation between Naturgy Energy and CenterPoint Energy

Assuming the 90 days horizon Naturgy Energy is expected to generate 3.14 times less return on investment than CenterPoint Energy. In addition to that, Naturgy Energy is 1.09 times more volatile than CenterPoint Energy. It trades about 0.01 of its total potential returns per unit of risk. CenterPoint Energy is currently generating about 0.04 per unit of volatility. If you would invest  2,560  in CenterPoint Energy on October 22, 2024 and sell it today you would earn a total of  560.00  from holding CenterPoint Energy or generate 21.88% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	99.8%
Values	Daily Returns

Naturgy Energy Group  vs.  CenterPoint Energy

Naturgy Energy Group

Risk-Adjusted Performance

5 of 100

Modest

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

CenterPoint Energy

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in CenterPoint Energy are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, CenterPoint Energy reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Naturgy Energy and CenterPoint Energy

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

The idea behind Naturgy Energy Group and CenterPoint 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.