Correlation Between Nomura Holdings and NRG Energy

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

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

Diversification Opportunities for Nomura Holdings and NRG Energy

0.8

Correlation Coefficient

Nomura Holdings  NRG Energy

Very poor diversification

The 3 months correlation between Nomura and NRG is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Nomura Holdings and NRG Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NRG Energy and Nomura Holdings 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 Nomura Holdings 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 Nomura Holdings i.e., Nomura Holdings and NRG Energy go up and down completely randomly.

Pair Corralation between Nomura Holdings and NRG Energy

If you would invest  8,692  in NRG Energy on September 15, 2024 and sell it today you would earn a total of  304.00  from holding NRG Energy or generate 3.5% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	4.35%
Values	Daily Returns

Nomura Holdings  vs.  NRG Energy

Nomura Holdings

Risk-Adjusted Performance

0 of 100

Good

Over the last 90 days Nomura Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly weak basic indicators, Nomura Holdings reported solid returns over the last few months and may actually be approaching a breakup point.

NRG Energy

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in NRG Energy are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, NRG Energy reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Nomura Holdings and NRG Energy

The main advantage of trading using opposite Nomura Holdings and NRG Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nomura Holdings 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 Nomura Holdings 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.