Correlation Between MAG SILVER and NRG Energy

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

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

Diversification Opportunities for MAG SILVER and NRG Energy

0.63

Correlation Coefficient

MAG SILVER  NRG Energy

Poor diversification

The 3 months correlation between MAG and NRG is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding MAG SILVER and NRG Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NRG Energy and MAG SILVER 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 MAG SILVER 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 MAG SILVER i.e., MAG SILVER and NRG Energy go up and down completely randomly.

Pair Corralation between MAG SILVER and NRG Energy

Assuming the 90 days trading horizon MAG SILVER is expected to generate 0.74 times more return on investment than NRG Energy. However, MAG SILVER is 1.36 times less risky than NRG Energy. It trades about 0.04 of its potential returns per unit of risk. NRG Energy is currently generating about 0.0 per unit of risk. If you would invest  1,421  in MAG SILVER on December 17, 2024 and sell it today you would earn a total of  64.00  from holding MAG SILVER or generate 4.5% return on investment over 90 days.

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

MAG SILVER  vs.  NRG Energy

MAG SILVER

Risk-Adjusted Performance

Insignificant

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

NRG Energy

Risk-Adjusted Performance

Very Weak

Over the last 90 days NRG Energy has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, NRG Energy is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with MAG SILVER and NRG Energy

The main advantage of trading using opposite MAG SILVER and NRG Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MAG SILVER 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 MAG SILVER 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 Global Correlations module to find global opportunities by holding instruments from different markets.