Correlation Between NRG Energy and HUNTINGTON

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

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

Diversification Opportunities for NRG Energy and HUNTINGTON

0.29

Correlation Coefficient

NRG Energy  HUNTINGTON

Modest diversification

The 3 months correlation between NRG and HUNTINGTON is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding NRG Energy and HUNTINGTON BANCSHARES INC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HUNTINGTON BANCSHARES INC 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 HUNTINGTON. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HUNTINGTON BANCSHARES INC has no effect on the direction of NRG Energy i.e., NRG Energy and HUNTINGTON go up and down completely randomly.

Pair Corralation between NRG Energy and HUNTINGTON

Considering the 90-day investment horizon NRG Energy is expected to generate 6.56 times more return on investment than HUNTINGTON. However, NRG Energy is 6.56 times more volatile than HUNTINGTON BANCSHARES INC. It trades about 0.06 of its potential returns per unit of risk. HUNTINGTON BANCSHARES INC is currently generating about -0.17 per unit of risk. If you would invest  9,184  in NRG Energy on December 23, 2024 and sell it today you would earn a total of  882.00  from holding NRG Energy or generate 9.6% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	93.44%
Values	Daily Returns

NRG Energy  vs.  HUNTINGTON BANCSHARES INC

NRG Energy

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in NRG Energy are ranked lower than 4 (%) 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.

HUNTINGTON BANCSHARES INC

Risk-Adjusted Performance

Very Weak

Over the last 90 days HUNTINGTON BANCSHARES INC has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, HUNTINGTON is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with NRG Energy and HUNTINGTON

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

The idea behind NRG Energy and HUNTINGTON BANCSHARES INC 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.