Correlation Between NRG Energy and Chiles Offshore

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

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

Diversification Opportunities for NRG Energy and Chiles Offshore

0.0

Correlation Coefficient

NRG Energy  Chiles Offshore

Pay attention - limited upside

The 3 months correlation between NRG and Chiles is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding NRG Energy and Chiles Offshore in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chiles Offshore 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 Chiles Offshore. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chiles Offshore has no effect on the direction of NRG Energy i.e., NRG Energy and Chiles Offshore go up and down completely randomly.

Pair Corralation between NRG Energy and Chiles Offshore

If you would invest  3,314  in NRG Energy on October 24, 2024 and sell it today you would earn a total of  7,751  from holding NRG Energy or generate 233.89% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

NRG Energy  vs.  Chiles Offshore

NRG Energy

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in NRG Energy are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, NRG Energy reported solid returns over the last few months and may actually be approaching a breakup point.

Chiles Offshore

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Chiles Offshore has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Chiles Offshore is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with NRG Energy and Chiles Offshore

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

The idea behind NRG Energy and Chiles Offshore 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.

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.