Correlation Between NRG Energy and SIMON

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Can any of the company-specific risk be diversified away by investing in both NRG Energy and SIMON 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 SIMON into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NRG Energy and SIMON PPTY GROUP, you can compare the effects of market volatilities on NRG Energy and SIMON 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 SIMON. Check out your portfolio center. Please also check ongoing floating volatility patterns of NRG Energy and SIMON.

Diversification Opportunities for NRG Energy and SIMON

NRGSIMONDiversified AwayNRGSIMONDiversified Away100%
-0.14
  Correlation Coefficient

Good diversification

The 3 months correlation between NRG and SIMON is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding NRG Energy and SIMON PPTY GROUP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SIMON PPTY GROUP 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 SIMON. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SIMON PPTY GROUP has no effect on the direction of NRG Energy i.e., NRG Energy and SIMON go up and down completely randomly.

Pair Corralation between NRG Energy and SIMON

Considering the 90-day investment horizon NRG Energy is expected to generate 2.08 times more return on investment than SIMON. However, NRG Energy is 2.08 times more volatile than SIMON PPTY GROUP. It trades about 0.12 of its potential returns per unit of risk. SIMON PPTY GROUP is currently generating about 0.04 per unit of risk. If you would invest  8,042  in NRG Energy on September 16, 2024 and sell it today you would earn a total of  1,456  from holding NRG Energy or generate 18.1% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy76.92%
ValuesDaily Returns

NRG Energy  vs.  SIMON PPTY GROUP

 Performance 
JavaScript chart by amCharts 3.21.15OctNov 0510152025
JavaScript chart by amCharts 3.21.15NRG 828807CE5
       Timeline  
NRG Energy 

Risk-Adjusted Performance

9 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in NRG Energy are ranked lower than 9 (%) 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.
JavaScript chart by amCharts 3.21.15OctNovDecNovDec859095100
SIMON PPTY GROUP 

Risk-Adjusted Performance

3 of 100

 
Weak
 
Strong
Insignificant
Compared to the overall equity markets, risk-adjusted returns on investments in SIMON PPTY GROUP are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, SIMON is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.
JavaScript chart by amCharts 3.21.1530233124110112114116118120

NRG Energy and SIMON Volatility Contrast

   Predicted Return Density   
JavaScript chart by amCharts 3.21.15-7.53-5.64-3.75-1.860.03352.014.026.038.05 0.050.100.150.200.25
JavaScript chart by amCharts 3.21.15NRG 828807CE5
       Returns  

Pair Trading with NRG Energy and SIMON

The main advantage of trading using opposite NRG Energy and SIMON positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NRG Energy position performs unexpectedly, SIMON 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 SIMON will offset losses from the drop in SIMON's long position.
The idea behind NRG Energy and SIMON PPTY GROUP 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.

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