Correlation Between Stellar and Naturgy Energy

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

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

Diversification Opportunities for Stellar and Naturgy Energy

0.35

Correlation Coefficient

Stellar  Naturgy Energy

Weak diversification

The 3 months correlation between Stellar and Naturgy is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding Stellar and Naturgy Energy Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Naturgy Energy Group and Stellar 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 Stellar are associated (or correlated) with Naturgy Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Naturgy Energy Group has no effect on the direction of Stellar i.e., Stellar and Naturgy Energy go up and down completely randomly.

Pair Corralation between Stellar and Naturgy Energy

Assuming the 90 days trading horizon Stellar is expected to generate 1.66 times less return on investment than Naturgy Energy. In addition to that, Stellar is 7.38 times more volatile than Naturgy Energy Group. It trades about 0.01 of its total potential returns per unit of risk. Naturgy Energy Group is currently generating about 0.1 per unit of volatility. If you would invest  2,332  in Naturgy Energy Group on October 10, 2024 and sell it today you would earn a total of  40.00  from holding Naturgy Energy Group or generate 1.72% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	80.95%
Values	Daily Returns

Stellar  vs.  Naturgy Energy Group

Stellar

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Stellar are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady primary indicators, Stellar exhibited solid returns over the last few months and may actually be approaching a breakup point.

Naturgy Energy Group

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Naturgy Energy Group are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Naturgy Energy may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Stellar and Naturgy Energy

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

The idea behind Stellar and Naturgy Energy 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.

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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.