Correlation Between NRG Energy and PLAYTIKA HOLDING

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

By analyzing existing cross correlation between NRG Energy and PLAYTIKA HOLDING DL 01, you can compare the effects of market volatilities on NRG Energy and PLAYTIKA HOLDING 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 NRG Energy with a short position of PLAYTIKA HOLDING. Check out your portfolio center. Please also check ongoing floating volatility patterns of NRG Energy and PLAYTIKA HOLDING.

Diversification Opportunities for NRG Energy and PLAYTIKA HOLDING

0.73

Correlation Coefficient

NRG Energy  PLAYTIKA HOLDING

Poor diversification

The 3 months correlation between NRG and PLAYTIKA is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding NRG Energy and PLAYTIKA HOLDING DL 01 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PLAYTIKA HOLDING and NRG 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 NRG Energy are associated (or correlated) with PLAYTIKA HOLDING. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PLAYTIKA HOLDING has no effect on the direction of NRG Energy i.e., NRG Energy and PLAYTIKA HOLDING go up and down completely randomly.

Pair Corralation between NRG Energy and PLAYTIKA HOLDING

Assuming the 90 days horizon NRG Energy is expected to generate 0.84 times more return on investment than PLAYTIKA HOLDING. However, NRG Energy is 1.2 times less risky than PLAYTIKA HOLDING. It trades about 0.12 of its potential returns per unit of risk. PLAYTIKA HOLDING DL 01 is currently generating about -0.01 per unit of risk. If you would invest  2,768  in NRG Energy on October 4, 2024 and sell it today you would earn a total of  5,992  from holding NRG Energy or generate 216.47% return on investment over 90 days.

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

NRG Energy  vs.  PLAYTIKA HOLDING DL 01

NRG Energy

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in NRG Energy are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, NRG Energy is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

PLAYTIKA HOLDING

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days PLAYTIKA HOLDING DL 01 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, PLAYTIKA HOLDING is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with NRG Energy and PLAYTIKA HOLDING

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

The idea behind NRG Energy and PLAYTIKA HOLDING DL 01 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.