Correlation Between NRG Energy and Park National

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

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

Diversification Opportunities for NRG Energy and Park National

0.61

Correlation Coefficient

NRG Energy  Park National

Poor diversification

The 3 months correlation between NRG and Park is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding NRG Energy and Park National in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Park National 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 Park National. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Park National has no effect on the direction of NRG Energy i.e., NRG Energy and Park National go up and down completely randomly.

Pair Corralation between NRG Energy and Park National

Considering the 90-day investment horizon NRG Energy is expected to generate 0.89 times more return on investment than Park National. However, NRG Energy is 1.12 times less risky than Park National. It trades about 0.12 of its potential returns per unit of risk. Park National is currently generating about 0.04 per unit of risk. If you would invest  2,988  in NRG Energy on October 4, 2024 and sell it today you would earn a total of  6,034  from holding NRG Energy or generate 201.94% return on investment over 90 days.

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

NRG Energy  vs.  Park National

NRG Energy

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days NRG Energy has generated negative risk-adjusted returns adding no value to investors with long positions. 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.

Park National

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Park National are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite quite unfluctuating basic indicators, Park National may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with NRG Energy and Park National

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

The idea behind NRG Energy and Park National 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.