Correlation Between SAN MIGUEL and NRG Energy

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

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

Diversification Opportunities for SAN MIGUEL and NRG Energy

-0.43

Correlation Coefficient

SAN MIGUEL  NRG Energy

Very good diversification

The 3 months correlation between SAN and NRG is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding SAN MIGUEL BREWERY and NRG Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NRG Energy and SAN MIGUEL 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 SAN MIGUEL BREWERY 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 SAN MIGUEL i.e., SAN MIGUEL and NRG Energy go up and down completely randomly.

Pair Corralation between SAN MIGUEL and NRG Energy

Assuming the 90 days trading horizon SAN MIGUEL is expected to generate 2.02 times less return on investment than NRG Energy. In addition to that, SAN MIGUEL is 1.04 times more volatile than NRG Energy. It trades about 0.21 of its total potential returns per unit of risk. NRG Energy is currently generating about 0.44 per unit of volatility. If you would invest  8,786  in NRG Energy on October 25, 2024 and sell it today you would earn a total of  1,924  from holding NRG Energy or generate 21.9% return on investment over 90 days.

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

SAN MIGUEL BREWERY  vs.  NRG Energy

SAN MIGUEL BREWERY

Risk-Adjusted Performance

1 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in SAN MIGUEL BREWERY are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, SAN MIGUEL is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

NRG Energy

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in NRG Energy are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, NRG Energy reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with SAN MIGUEL and NRG Energy

The main advantage of trading using opposite SAN MIGUEL and NRG Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SAN MIGUEL 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 SAN MIGUEL BREWERY 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.