Correlation Between ABC Arbitrage and NRJ

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

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

Diversification Opportunities for ABC Arbitrage and NRJ

-0.79

Correlation Coefficient

ABC Arbitrage  NRJ

Pay attention - limited upside

The 3 months correlation between ABC and NRJ is -0.79. Overlapping area represents the amount of risk that can be diversified away by holding ABC arbitrage SA and NRJ Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NRJ Group and ABC Arbitrage 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 ABC arbitrage SA are associated (or correlated) with NRJ. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NRJ Group has no effect on the direction of ABC Arbitrage i.e., ABC Arbitrage and NRJ go up and down completely randomly.

Pair Corralation between ABC Arbitrage and NRJ

Assuming the 90 days trading horizon ABC arbitrage SA is expected to generate 1.58 times more return on investment than NRJ. However, ABC Arbitrage is 1.58 times more volatile than NRJ Group. It trades about 0.17 of its potential returns per unit of risk. NRJ Group is currently generating about -0.2 per unit of risk. If you would invest  422.00  in ABC arbitrage SA on September 2, 2024 and sell it today you would earn a total of  64.00  from holding ABC arbitrage SA or generate 15.17% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

ABC arbitrage SA  vs.  NRJ Group

ABC arbitrage SA

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in ABC arbitrage SA are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, ABC Arbitrage sustained solid returns over the last few months and may actually be approaching a breakup point.

NRJ Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days NRJ Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's technical and fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with ABC Arbitrage and NRJ

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

The idea behind ABC arbitrage SA and NRJ 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.