Correlation Between NRG Energy and CANON MARKETING

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

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

Diversification Opportunities for NRG Energy and CANON MARKETING

0.66

Correlation Coefficient

NRG Energy  CANON MARKETING

Poor diversification

The 3 months correlation between NRG and CANON is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding NRG Energy and CANON MARKETING JP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CANON MARKETING JP 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 CANON MARKETING. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CANON MARKETING JP has no effect on the direction of NRG Energy i.e., NRG Energy and CANON MARKETING go up and down completely randomly.

Pair Corralation between NRG Energy and CANON MARKETING

Assuming the 90 days horizon NRG Energy is expected to generate 1.49 times more return on investment than CANON MARKETING. However, NRG Energy is 1.49 times more volatile than CANON MARKETING JP. It trades about 0.12 of its potential returns per unit of risk. CANON MARKETING JP is currently generating about 0.07 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.  CANON MARKETING JP

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.

CANON MARKETING JP

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in CANON MARKETING JP are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain forward-looking indicators, CANON MARKETING may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with NRG Energy and CANON MARKETING

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

The idea behind NRG Energy and CANON MARKETING JP 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.