Correlation Between NRJ and Gevelot

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

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

Diversification Opportunities for NRJ and Gevelot

0.69

Correlation Coefficient

NRJ  Gevelot

Poor diversification

The 3 months correlation between NRJ and Gevelot is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding NRJ Group and Gevelot in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gevelot and NRJ 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 NRJ Group are associated (or correlated) with Gevelot. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gevelot has no effect on the direction of NRJ i.e., NRJ and Gevelot go up and down completely randomly.

Pair Corralation between NRJ and Gevelot

Assuming the 90 days trading horizon NRJ Group is expected to under-perform the Gevelot. In addition to that, NRJ is 1.73 times more volatile than Gevelot. It trades about -0.33 of its total potential returns per unit of risk. Gevelot is currently generating about -0.04 per unit of volatility. If you would invest  18,900  in Gevelot on September 5, 2024 and sell it today you would lose (100.00) from holding Gevelot or give up 0.53% of portfolio value over 90 days.

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

NRJ Group  vs.  Gevelot

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.

Gevelot

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Gevelot has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Gevelot is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with NRJ and Gevelot

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

The idea behind NRJ Group and Gevelot 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 Global Correlations module to find global opportunities by holding instruments from different markets.