Correlation Between NRJ and Netgem SA

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

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

Diversification Opportunities for NRJ and Netgem SA

-0.71

Correlation Coefficient

NRJ  Netgem SA

Pay attention - limited upside

The 3 months correlation between NRJ and Netgem is -0.71. Overlapping area represents the amount of risk that can be diversified away by holding NRJ Group and Netgem SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Netgem SA 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 Netgem SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Netgem SA has no effect on the direction of NRJ i.e., NRJ and Netgem SA go up and down completely randomly.

Pair Corralation between NRJ and Netgem SA

Assuming the 90 days trading horizon NRJ Group is expected to under-perform the Netgem SA. But the stock apears to be less risky and, when comparing its historical volatility, NRJ Group is 2.48 times less risky than Netgem SA. The stock trades about -0.3 of its potential returns per unit of risk. The Netgem SA is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest  103.00  in Netgem SA on September 2, 2024 and sell it today you would lose (2.00) from holding Netgem SA or give up 1.94% of portfolio value over 90 days.

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

NRJ Group  vs.  Netgem SA

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.

Netgem SA

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Netgem SA are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Netgem SA reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with NRJ and Netgem SA

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

The idea behind NRJ Group and Netgem SA 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.