Correlation Between Atlantic Power and NRG Energy

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Can any of the company-specific risk be diversified away by investing in both Atlantic Power 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 Atlantic Power and NRG Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Atlantic Power and NRG Energy, you can compare the effects of market volatilities on Atlantic Power 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 Atlantic Power with a short position of NRG Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Atlantic Power and NRG Energy.

Diversification Opportunities for Atlantic Power and NRG Energy

0.0
  Correlation Coefficient

Pay attention - limited upside

The 3 months correlation between Atlantic and NRG is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Atlantic Power and NRG Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NRG Energy and Atlantic Power 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 Atlantic Power 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 Atlantic Power i.e., Atlantic Power and NRG Energy go up and down completely randomly.

Pair Corralation between Atlantic Power and NRG Energy

If you would invest  5,404  in NRG Energy on December 29, 2023 and sell it today you would earn a total of  1,365  from holding NRG Energy or generate 25.26% return on investment over 90 days.
Time Period3 Months [change]
DirectionFlat 
StrengthInsignificant
Accuracy0.0%
ValuesDaily Returns

Atlantic Power  vs.  NRG Energy

 Performance 
       Timeline  
Atlantic Power 

Risk-Adjusted Performance

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High
Very Weak
Over the last 90 days Atlantic Power has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Atlantic Power is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.
NRG Energy 

Risk-Adjusted Performance

25 of 100

 
Low
 
High
Solid
Compared to the overall equity markets, risk-adjusted returns on investments in NRG Energy are ranked lower than 25 (%) of all global equities and portfolios over the last 90 days. Despite nearly unfluctuating basic indicators, NRG Energy reported solid returns over the last few months and may actually be approaching a breakup point.

Atlantic Power and NRG Energy Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Atlantic Power and NRG Energy

The main advantage of trading using opposite Atlantic Power and NRG Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Atlantic Power 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 Atlantic Power 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.
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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.

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