Correlation Between NRG Energy and WPLAU

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

By analyzing existing cross correlation between NRG Energy and WPLAU 37 15 SEP 26, you can compare the effects of market volatilities on NRG Energy and WPLAU 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 WPLAU. Check out your portfolio center. Please also check ongoing floating volatility patterns of NRG Energy and WPLAU.

Diversification Opportunities for NRG Energy and WPLAU

0.41

Correlation Coefficient

NRG Energy  WPLAU

Very weak diversification

The 3 months correlation between NRG and WPLAU is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding NRG Energy and WPLAU 37 15 SEP 26 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WPLAU 37 15 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 WPLAU. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WPLAU 37 15 has no effect on the direction of NRG Energy i.e., NRG Energy and WPLAU go up and down completely randomly.

Pair Corralation between NRG Energy and WPLAU

Considering the 90-day investment horizon NRG Energy is expected to under-perform the WPLAU. In addition to that, NRG Energy is 13.32 times more volatile than WPLAU 37 15 SEP 26. It trades about -0.08 of its total potential returns per unit of risk. WPLAU 37 15 SEP 26 is currently generating about 0.15 per unit of volatility. If you would invest  9,767  in WPLAU 37 15 SEP 26 on September 21, 2024 and sell it today you would earn a total of  33.00  from holding WPLAU 37 15 SEP 26 or generate 0.34% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	47.62%
Values	Daily Returns

NRG Energy  vs.  WPLAU 37 15 SEP 26

NRG Energy

Risk-Adjusted Performance

1 of 100

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.

WPLAU 37 15

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days WPLAU 37 15 SEP 26 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, WPLAU is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with NRG Energy and WPLAU

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

The idea behind NRG Energy and WPLAU 37 15 SEP 26 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.