Correlation Between NRG Energy and Nubia Brand

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

By analyzing existing cross correlation between NRG Energy and Nubia Brand International, you can compare the effects of market volatilities on NRG Energy and Nubia Brand 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 Nubia Brand. Check out your portfolio center. Please also check ongoing floating volatility patterns of NRG Energy and Nubia Brand.

Diversification Opportunities for NRG Energy and Nubia Brand

-0.46

Correlation Coefficient

NRG Energy  Nubia Brand

Very good diversification

The 3 months correlation between NRG and Nubia is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding NRG Energy and Nubia Brand International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nubia Brand International 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 Nubia Brand. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nubia Brand International has no effect on the direction of NRG Energy i.e., NRG Energy and Nubia Brand go up and down completely randomly.

Pair Corralation between NRG Energy and Nubia Brand

Considering the 90-day investment horizon NRG Energy is expected to generate 3.91 times more return on investment than Nubia Brand. However, NRG Energy is 3.91 times more volatile than Nubia Brand International. It trades about 0.12 of its potential returns per unit of risk. Nubia Brand International is currently generating about 0.01 per unit of risk. If you would invest  2,983  in NRG Energy on September 20, 2024 and sell it today you would earn a total of  5,942  from holding NRG Energy or generate 199.2% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	28.23%
Values	Daily Returns

NRG Energy  vs.  Nubia Brand International

NRG Energy

Risk-Adjusted Performance

2 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in NRG Energy are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, NRG Energy is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Nubia Brand International

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Nubia Brand International has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable forward indicators, Nubia Brand is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with NRG Energy and Nubia Brand

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

The idea behind NRG Energy and Nubia Brand International 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.