Correlation Between NRG Energy and Whole Foods

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

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

Diversification Opportunities for NRG Energy and Whole Foods

0.0

Correlation Coefficient

NRG Energy  Whole Foods

Pay attention - limited upside

The 3 months correlation between NRG and Whole is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding NRG Energy and Whole Foods Market in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Whole Foods Market 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 Whole Foods. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Whole Foods Market has no effect on the direction of NRG Energy i.e., NRG Energy and Whole Foods go up and down completely randomly.

Pair Corralation between NRG Energy and Whole Foods

If you would invest  7,015  in NRG Energy on January 29, 2024 and sell it today you would earn a total of  266.00  from holding NRG Energy or generate 3.79% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

NRG Energy  vs.  Whole Foods Market

NRG Energy

Risk-Adjusted Performance

22 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in NRG Energy are ranked lower than 22 (%) 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.

Whole Foods Market

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Whole Foods Market has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy technical and fundamental indicators, Whole Foods is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with NRG Energy and Whole Foods

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

The idea behind NRG Energy and Whole Foods Market 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.