Correlation Between NRG Energy and Heritage Distilling

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

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

Diversification Opportunities for NRG Energy and Heritage Distilling

0.36

Correlation Coefficient

NRG Energy  Heritage Distilling

Weak diversification

The 3 months correlation between NRG and Heritage is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding NRG Energy and Heritage Distilling Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Heritage Distilling and NRG Energy 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 NRG Energy are associated (or correlated) with Heritage Distilling. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Heritage Distilling has no effect on the direction of NRG Energy i.e., NRG Energy and Heritage Distilling go up and down completely randomly.

Pair Corralation between NRG Energy and Heritage Distilling

Considering the 90-day investment horizon NRG Energy is expected to generate 0.58 times more return on investment than Heritage Distilling. However, NRG Energy is 1.71 times less risky than Heritage Distilling. It trades about 0.07 of its potential returns per unit of risk. Heritage Distilling Holding is currently generating about -0.33 per unit of risk. If you would invest  9,164  in NRG Energy on September 15, 2024 and sell it today you would earn a total of  334.00  from holding NRG Energy or generate 3.64% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	76.19%
Values	Daily Returns

NRG Energy  vs.  Heritage Distilling Holding

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.

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.

Pair Trading with NRG Energy and Heritage Distilling

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

The idea behind NRG Energy and Heritage Distilling Holding 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.