Correlation Between Heritage Distilling and NRG Energy

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

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

Diversification Opportunities for Heritage Distilling and NRG Energy

0.36

Correlation Coefficient

Heritage Distilling  NRG Energy

Weak diversification

The 3 months correlation between Heritage and NRG is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Heritage Distilling Holding and NRG Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NRG Energy and Heritage Distilling 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 Heritage Distilling Holding 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 Heritage Distilling i.e., Heritage Distilling and NRG Energy go up and down completely randomly.

Pair Corralation between Heritage Distilling and NRG Energy

Given the investment horizon of 90 days Heritage Distilling Holding is expected to under-perform the NRG Energy. In addition to that, Heritage Distilling is 2.04 times more volatile than NRG Energy. It trades about -0.33 of its total potential returns per unit of risk. NRG Energy is currently generating about 0.12 per unit of volatility. If you would invest  8,042  in NRG Energy on September 15, 2024 and sell it today you would earn a total of  1,456  from holding NRG Energy or generate 18.1% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	25.0%
Values	Daily Returns

Heritage Distilling Holding  vs.  NRG Energy

Heritage Distilling

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Heritage Distilling Holding has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Stock's basic indicators remain quite persistent which may send shares a bit higher in January 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

NRG Energy

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in NRG Energy are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, NRG Energy reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Heritage Distilling and NRG Energy

The main advantage of trading using opposite Heritage Distilling and NRG Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Heritage Distilling 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 Heritage Distilling Holding 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.