Correlation Between NRG ENERGY and Astral Foods

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

By analyzing existing cross correlation between NRG ENERGY and Astral Foods Limited, you can compare the effects of market volatilities on NRG ENERGY and Astral Foods 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 Astral Foods. Check out your portfolio center. Please also check ongoing floating volatility patterns of NRG ENERGY and Astral Foods.

Diversification Opportunities for NRG ENERGY and Astral Foods

0.5

Correlation Coefficient

NRG ENERGY  Astral Foods

Very weak diversification

The 3 months correlation between NRG and Astral is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding NRG ENERGY and Astral Foods Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Astral Foods Limited 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 Astral Foods. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Astral Foods Limited has no effect on the direction of NRG ENERGY i.e., NRG ENERGY and Astral Foods go up and down completely randomly.

Pair Corralation between NRG ENERGY and Astral Foods

Assuming the 90 days trading horizon NRG ENERGY is expected to generate 1.05 times more return on investment than Astral Foods. However, NRG ENERGY is 1.05 times more volatile than Astral Foods Limited. It trades about 0.13 of its potential returns per unit of risk. Astral Foods Limited is currently generating about 0.06 per unit of risk. If you would invest  4,486  in NRG ENERGY on October 9, 2024 and sell it today you would earn a total of  4,930  from holding NRG ENERGY or generate 109.9% return on investment over 90 days.

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

NRG ENERGY  vs.  Astral Foods Limited

NRG ENERGY

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in NRG ENERGY are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, NRG ENERGY unveiled solid returns over the last few months and may actually be approaching a breakup point.

Astral Foods Limited

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Astral Foods Limited are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Astral Foods is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with NRG ENERGY and Astral Foods

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

The idea behind NRG ENERGY and Astral Foods Limited 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.