Correlation Between Varta AG and NRG Energy

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

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

Diversification Opportunities for Varta AG and NRG Energy

0.0

Correlation Coefficient

Varta AG  NRG Energy

Pay attention - limited upside

The 3 months correlation between Varta and NRG is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Varta AG and NRG Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NRG Energy and Varta AG 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 Varta AG are associated (or correlated) with NRG Energy. 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 has no effect on the direction of Varta AG i.e., Varta AG and NRG Energy go up and down completely randomly.

Pair Corralation between Varta AG and NRG Energy

If you would invest  8,486  in NRG Energy on October 4, 2024 and sell it today you would earn a total of  274.00  from holding NRG Energy or generate 3.23% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

Varta AG  vs.  NRG Energy

Varta AG

Risk-Adjusted Performance

0 of 100

Modest

Over the last 90 days Varta AG has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Varta AG is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

NRG Energy

Risk-Adjusted Performance

2 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in NRG Energy are ranked lower than 2 (%) 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 current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Varta AG and NRG Energy

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

The idea behind Varta AG and NRG Energy 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.