Correlation Between NRG Energy and Perceptive Capital

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

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

Diversification Opportunities for NRG Energy and Perceptive Capital

0.42

Correlation Coefficient

NRG Energy  Perceptive Capital

Very weak diversification

The 3 months correlation between NRG and Perceptive is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding NRG Energy and Perceptive Capital Solutions in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Perceptive Capital 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 Perceptive Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Perceptive Capital has no effect on the direction of NRG Energy i.e., NRG Energy and Perceptive Capital go up and down completely randomly.

Pair Corralation between NRG Energy and Perceptive Capital

Considering the 90-day investment horizon NRG Energy is expected to generate 10.92 times more return on investment than Perceptive Capital. However, NRG Energy is 10.92 times more volatile than Perceptive Capital Solutions. It trades about 0.03 of its potential returns per unit of risk. Perceptive Capital Solutions is currently generating about 0.1 per unit of risk. If you would invest  9,607  in NRG Energy on October 10, 2024 and sell it today you would earn a total of  66.00  from holding NRG Energy or generate 0.69% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	95.24%
Values	Daily Returns

NRG Energy  vs.  Perceptive Capital Solutions

NRG Energy

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in NRG Energy are ranked lower than 6 (%) 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.

Perceptive Capital

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Perceptive Capital Solutions are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, Perceptive Capital 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 Perceptive Capital

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

The idea behind NRG Energy and Perceptive Capital Solutions 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.