Correlation Between NRG Energy and BECTON

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

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

Diversification Opportunities for NRG Energy and BECTON

0.09

Correlation Coefficient

NRG Energy  BECTON

Significant diversification

The 3 months correlation between NRG and BECTON is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding NRG Energy and BECTON DICKINSON AND in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BECTON DICKINSON AND 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 BECTON. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BECTON DICKINSON AND has no effect on the direction of NRG Energy i.e., NRG Energy and BECTON go up and down completely randomly.

Pair Corralation between NRG Energy and BECTON

Considering the 90-day investment horizon NRG Energy is expected to under-perform the BECTON. In addition to that, NRG Energy is 11.12 times more volatile than BECTON DICKINSON AND. It trades about -0.01 of its total potential returns per unit of risk. BECTON DICKINSON AND is currently generating about 0.23 per unit of volatility. If you would invest  8,975  in BECTON DICKINSON AND on December 3, 2024 and sell it today you would earn a total of  132.00  from holding BECTON DICKINSON AND or generate 1.47% return on investment over 90 days.

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

NRG Energy  vs.  BECTON DICKINSON AND

NRG Energy

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in NRG Energy are ranked lower than 1 (%) 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.

BECTON DICKINSON AND

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in BECTON DICKINSON AND are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, BECTON 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 BECTON

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

The idea behind NRG Energy and BECTON DICKINSON AND 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.