Correlation Between NRG Energy and Micron Technology
Can any of the company-specific risk be diversified away by investing in both NRG Energy and Micron Technology 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 Micron Technology into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NRG Energy and Micron Technology, you can compare the effects of market volatilities on NRG Energy and Micron Technology 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 Micron Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of NRG Energy and Micron Technology.
Diversification Opportunities for NRG Energy and Micron Technology
-0.09 | Correlation Coefficient |
Good diversification
The 3 months correlation between NRG and Micron is -0.09. Overlapping area represents the amount of risk that can be diversified away by holding NRG Energy and Micron Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Micron Technology 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 Micron Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Micron Technology has no effect on the direction of NRG Energy i.e., NRG Energy and Micron Technology go up and down completely randomly.
Pair Corralation between NRG Energy and Micron Technology
Assuming the 90 days horizon NRG Energy is expected to generate 0.44 times more return on investment than Micron Technology. However, NRG Energy is 2.29 times less risky than Micron Technology. It trades about 0.09 of its potential returns per unit of risk. Micron Technology is currently generating about 0.01 per unit of risk. If you would invest 9,320 in NRG Energy on October 9, 2024 and sell it today you would earn a total of 296.00 from holding NRG Energy or generate 3.18% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Insignificant |
Accuracy | 100.0% |
Values | Daily Returns |
NRG Energy vs. Micron Technology
Performance |
Timeline |
NRG Energy |
Micron Technology |
NRG Energy and Micron Technology Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with NRG Energy and Micron Technology
The main advantage of trading using opposite NRG Energy and Micron Technology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NRG Energy position performs unexpectedly, Micron Technology 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 Micron Technology will offset losses from the drop in Micron Technology's long position.NRG Energy vs. Lamar Advertising | NRG Energy vs. Bio Techne Corp | NRG Energy vs. CARSALESCOM | NRG Energy vs. GungHo Online Entertainment |
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Check out your portfolio center.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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.
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