Correlation Between Hudson Pacific and NRG Energy

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

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

Diversification Opportunities for Hudson Pacific and NRG Energy

0.29

Correlation Coefficient

Hudson Pacific  NRG Energy

Modest diversification

The 3 months correlation between Hudson and NRG is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Hudson Pacific Properties and NRG Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NRG Energy and Hudson Pacific 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 Hudson Pacific Properties 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 Hudson Pacific i.e., Hudson Pacific and NRG Energy go up and down completely randomly.

Pair Corralation between Hudson Pacific and NRG Energy

Considering the 90-day investment horizon Hudson Pacific Properties is expected to generate 1.26 times more return on investment than NRG Energy. However, Hudson Pacific is 1.26 times more volatile than NRG Energy. It trades about 0.07 of its potential returns per unit of risk. NRG Energy is currently generating about 0.05 per unit of risk. If you would invest  261.00  in Hudson Pacific Properties on December 19, 2024 and sell it today you would earn a total of  36.00  from holding Hudson Pacific Properties or generate 13.79% return on investment over 90 days.

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

Hudson Pacific Properties  vs.  NRG Energy

Hudson Pacific Properties

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Hudson Pacific Properties are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Even with relatively unsteady basic indicators, Hudson Pacific reported solid returns over the last few months and may actually be approaching a breakup point.

NRG Energy

Risk-Adjusted Performance

Insignificant

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. Despite nearly unsteady basic indicators, NRG Energy may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Hudson Pacific and NRG Energy

The main advantage of trading using opposite Hudson Pacific and NRG Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hudson Pacific 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 Hudson Pacific Properties 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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.