Correlation Between PACCAR and 629377CE0

Can any of the company-specific risk be diversified away by investing in both PACCAR and 629377CE0 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 PACCAR and 629377CE0 into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between PACCAR Inc and NRG Energy 575, you can compare the effects of market volatilities on PACCAR and 629377CE0 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 PACCAR with a short position of 629377CE0. Check out your portfolio center. Please also check ongoing floating volatility patterns of PACCAR and 629377CE0.

Diversification Opportunities for PACCAR and 629377CE0

0.18

Correlation Coefficient

PACCAR  629377CE0

Average diversification

The 3 months correlation between PACCAR and 629377CE0 is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding PACCAR Inc and NRG Energy 575 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NRG Energy 575 and PACCAR 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 PACCAR Inc are associated (or correlated) with 629377CE0. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NRG Energy 575 has no effect on the direction of PACCAR i.e., PACCAR and 629377CE0 go up and down completely randomly.

Pair Corralation between PACCAR and 629377CE0

Given the investment horizon of 90 days PACCAR Inc is expected to generate 5.87 times more return on investment than 629377CE0. However, PACCAR is 5.87 times more volatile than NRG Energy 575. It trades about 0.04 of its potential returns per unit of risk. NRG Energy 575 is currently generating about 0.0 per unit of risk. If you would invest  9,810  in PACCAR Inc on October 8, 2024 and sell it today you would earn a total of  680.00  from holding PACCAR Inc or generate 6.93% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.4%
Values	Daily Returns

PACCAR Inc  vs.  NRG Energy 575

PACCAR Inc

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in PACCAR Inc are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Even with relatively abnormal basic indicators, PACCAR may actually be approaching a critical reversion point that can send shares even higher in February 2025.

NRG Energy 575

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days NRG Energy 575 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, 629377CE0 is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with PACCAR and 629377CE0

The main advantage of trading using opposite PACCAR and 629377CE0 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PACCAR position performs unexpectedly, 629377CE0 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 629377CE0 will offset losses from the drop in 629377CE0's long position.

The idea behind PACCAR Inc and NRG Energy 575 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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.