Correlation Between NRG Energy and NH Foods

Can any of the company-specific risk be diversified away by investing in both NRG Energy and NH 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 NH 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 NH Foods Ltd, you can compare the effects of market volatilities on NRG Energy and NH 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 NH Foods. Check out your portfolio center. Please also check ongoing floating volatility patterns of NRG Energy and NH Foods.

Diversification Opportunities for NRG Energy and NH Foods

0.0

Correlation Coefficient

NRG Energy  NH Foods

Pay attention - limited upside

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

Pair Corralation between NRG Energy and NH Foods

Considering the 90-day investment horizon NRG Energy is expected to generate 5.98 times more return on investment than NH Foods. However, NRG Energy is 5.98 times more volatile than NH Foods Ltd. It trades about 0.05 of its potential returns per unit of risk. NH Foods Ltd is currently generating about 0.09 per unit of risk. If you would invest  8,145  in NRG Energy on September 23, 2024 and sell it today you would earn a total of  900.00  from holding NRG Energy or generate 11.05% return on investment over 90 days.

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

NRG Energy  vs.  NH Foods Ltd

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.

NH Foods

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days NH Foods Ltd has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong primary indicators, NH Foods is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with NRG Energy and NH Foods

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

The idea behind NRG Energy and NH Foods Ltd 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.