Correlation Between NRG Energy and NiSource
Can any of the company-specific risk be diversified away by investing in both NRG Energy and NiSource 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 NiSource into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NRG Energy and NiSource, you can compare the effects of market volatilities on NRG Energy and NiSource 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 NiSource. Check out your portfolio center. Please also check ongoing floating volatility patterns of NRG Energy and NiSource.
Diversification Opportunities for NRG Energy and NiSource
0.88 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between NRG and NiSource is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding NRG Energy and NiSource in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NiSource 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 NiSource. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NiSource has no effect on the direction of NRG Energy i.e., NRG Energy and NiSource go up and down completely randomly.
Pair Corralation between NRG Energy and NiSource
Considering the 90-day investment horizon NRG Energy is expected to generate 1.37 times more return on investment than NiSource. However, NRG Energy is 1.37 times more volatile than NiSource. It trades about 0.08 of its potential returns per unit of risk. NiSource is currently generating about 0.01 per unit of risk. If you would invest 3,874 in NRG Energy on January 26, 2024 and sell it today you would earn a total of 3,387 from holding NRG Energy or generate 87.43% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
NRG Energy vs. NiSource
Performance |
| Timeline |
| NRG Energy |
| NiSource |
NRG Energy and NiSource Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with NRG Energy and NiSource
The main advantage of trading using opposite NRG Energy and NiSource positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NRG Energy position performs unexpectedly, NiSource 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 NiSource will offset losses from the drop in NiSource's long position.| NRG Energy vs. AGL Energy | NRG Energy vs. Power Assets Holdings | NRG Energy vs. Maxim Power Corp | NRG Energy vs. Huaneng Power International |
| NiSource vs. NewJersey Resources | NiSource vs. Northwest Natural Gas | NiSource vs. UGI Corporation | NiSource vs. Spire Inc |
Check out your portfolio center.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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
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