Correlation Between National Grid and Via Renewables

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

By analyzing existing cross correlation between National Grid PLC and Via Renewables, you can compare the effects of market volatilities on National Grid and Via Renewables 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 National Grid with a short position of Via Renewables. Check out your portfolio center. Please also check ongoing floating volatility patterns of National Grid and Via Renewables.

Diversification Opportunities for National Grid and Via Renewables

0.67

Correlation Coefficient

National Grid  Via Renewables

Poor diversification

The 3 months correlation between National and Via is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding National Grid PLC and Via Renewables in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Via Renewables and National Grid 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 National Grid PLC are associated (or correlated) with Via Renewables. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Via Renewables has no effect on the direction of National Grid i.e., National Grid and Via Renewables go up and down completely randomly.

Pair Corralation between National Grid and Via Renewables

Considering the 90-day investment horizon National Grid PLC is expected to generate 2.02 times more return on investment than Via Renewables. However, National Grid is 2.02 times more volatile than Via Renewables. It trades about 0.13 of its potential returns per unit of risk. Via Renewables is currently generating about 0.13 per unit of risk. If you would invest  5,921  in National Grid PLC on December 28, 2024 and sell it today you would earn a total of  636.00  from holding National Grid PLC or generate 10.74% return on investment over 90 days.

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

National Grid PLC  vs.  Via Renewables

National Grid PLC

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in National Grid PLC are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak technical and fundamental indicators, National Grid may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Via Renewables

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Via Renewables are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable basic indicators, Via Renewables is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with National Grid and Via Renewables

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

The idea behind National Grid PLC and Via Renewables 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.