Correlation Between NRG Energy and Enlight Renewable

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

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

Diversification Opportunities for NRG Energy and Enlight Renewable

0.22

Correlation Coefficient

NRG Energy  Enlight Renewable

Modest diversification

The 3 months correlation between NRG and Enlight is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding NRG Energy and Enlight Renewable Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Enlight Renewable Energy 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 Enlight Renewable. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Enlight Renewable Energy has no effect on the direction of NRG Energy i.e., NRG Energy and Enlight Renewable go up and down completely randomly.

Pair Corralation between NRG Energy and Enlight Renewable

Considering the 90-day investment horizon NRG Energy is expected to generate 1.39 times more return on investment than Enlight Renewable. However, NRG Energy is 1.39 times more volatile than Enlight Renewable Energy. It trades about -0.01 of its potential returns per unit of risk. Enlight Renewable Energy is currently generating about -0.08 per unit of risk. If you would invest  9,187  in NRG Energy on September 24, 2024 and sell it today you would lose (142.00) from holding NRG Energy or give up 1.55% of portfolio value over 90 days.

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

NRG Energy  vs.  Enlight Renewable Energy

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 latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Enlight Renewable Energy

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Enlight Renewable Energy has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable essential indicators, Enlight Renewable 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 Enlight Renewable

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

The idea behind NRG Energy and Enlight Renewable Energy 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.