Correlation Between NRJ and Bains Mer

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

By analyzing existing cross correlation between NRJ Group and Bains Mer Monaco, you can compare the effects of market volatilities on NRJ and Bains Mer 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 NRJ with a short position of Bains Mer. Check out your portfolio center. Please also check ongoing floating volatility patterns of NRJ and Bains Mer.

Diversification Opportunities for NRJ and Bains Mer

-0.28

Correlation Coefficient

NRJ  Bains Mer

Very good diversification

The 3 months correlation between NRJ and Bains is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding NRJ Group and Bains Mer Monaco in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bains Mer Monaco and NRJ 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 NRJ Group are associated (or correlated) with Bains Mer. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bains Mer Monaco has no effect on the direction of NRJ i.e., NRJ and Bains Mer go up and down completely randomly.

Pair Corralation between NRJ and Bains Mer

Assuming the 90 days trading horizon NRJ is expected to generate 1.63 times less return on investment than Bains Mer. But when comparing it to its historical volatility, NRJ Group is 1.24 times less risky than Bains Mer. It trades about 0.01 of its potential returns per unit of risk. Bains Mer Monaco is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  10,200  in Bains Mer Monaco on December 22, 2024 and sell it today you would earn a total of  100.00  from holding Bains Mer Monaco or generate 0.98% return on investment over 90 days.

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

NRJ Group  vs.  Bains Mer Monaco

NRJ Group

Risk-Adjusted Performance

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in NRJ Group are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong technical and fundamental indicators, NRJ is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Bains Mer Monaco

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Bains Mer Monaco are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Bains Mer is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with NRJ and Bains Mer

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

The idea behind NRJ Group and Bains Mer Monaco 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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.