Correlation Between NRG Energy and GAZTRTECHNIUADR1/5EO01

Can any of the company-specific risk be diversified away by investing in both NRG Energy and GAZTRTECHNIUADR1/5EO01 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 GAZTRTECHNIUADR1/5EO01 into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between NRG Energy and GAZTRTECHNIUADR15EO01, you can compare the effects of market volatilities on NRG Energy and GAZTRTECHNIUADR1/5EO01 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 GAZTRTECHNIUADR1/5EO01. Check out your portfolio center. Please also check ongoing floating volatility patterns of NRG Energy and GAZTRTECHNIUADR1/5EO01.

Diversification Opportunities for NRG Energy and GAZTRTECHNIUADR1/5EO01

0.17

Correlation Coefficient

NRG Energy  GAZTRTECHNIUADR1/5EO01

Average diversification

The 3 months correlation between NRG and GAZTRTECHNIUADR1/5EO01 is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding NRG Energy and GAZTRTECHNIUADR15EO01 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GAZTRTECHNIUADR1/5EO01 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 GAZTRTECHNIUADR1/5EO01. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GAZTRTECHNIUADR1/5EO01 has no effect on the direction of NRG Energy i.e., NRG Energy and GAZTRTECHNIUADR1/5EO01 go up and down completely randomly.

Pair Corralation between NRG Energy and GAZTRTECHNIUADR1/5EO01

Assuming the 90 days horizon NRG Energy is expected to generate 1.6 times less return on investment than GAZTRTECHNIUADR1/5EO01. In addition to that, NRG Energy is 1.51 times more volatile than GAZTRTECHNIUADR15EO01. It trades about 0.04 of its total potential returns per unit of risk. GAZTRTECHNIUADR15EO01 is currently generating about 0.09 per unit of volatility. If you would invest  2,520  in GAZTRTECHNIUADR15EO01 on December 27, 2024 and sell it today you would earn a total of  340.00  from holding GAZTRTECHNIUADR15EO01 or generate 13.49% return on investment over 90 days.

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

NRG Energy  vs.  GAZTRTECHNIUADR15EO01

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

GAZTRTECHNIUADR1/5EO01

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in GAZTRTECHNIUADR15EO01 are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile technical and fundamental indicators, GAZTRTECHNIUADR1/5EO01 reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with NRG Energy and GAZTRTECHNIUADR1/5EO01

The main advantage of trading using opposite NRG Energy and GAZTRTECHNIUADR1/5EO01 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NRG Energy position performs unexpectedly, GAZTRTECHNIUADR1/5EO01 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 GAZTRTECHNIUADR1/5EO01 will offset losses from the drop in GAZTRTECHNIUADR1/5EO01's long position.

The idea behind NRG Energy and GAZTRTECHNIUADR15EO01 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.