Correlation Between AGL Energy and NRG Energy

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

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

Diversification Opportunities for AGL Energy and NRG Energy

-0.24

Correlation Coefficient

AGL Energy  NRG Energy

Very good diversification

The 3 months correlation between AGL and NRG is -0.24. Overlapping area represents the amount of risk that can be diversified away by holding AGL Energy and NRG Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NRG Energy and AGL 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 AGL Energy 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 AGL Energy i.e., AGL Energy and NRG Energy go up and down completely randomly.

Pair Corralation between AGL Energy and NRG Energy

Assuming the 90 days horizon AGL Energy is expected to under-perform the NRG Energy. But the pink sheet apears to be less risky and, when comparing its historical volatility, AGL Energy is 1.54 times less risky than NRG Energy. The pink sheet trades about -0.04 of its potential returns per unit of risk. The NRG Energy is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  11,836  in NRG Energy on May 7, 2025 and sell it today you would earn a total of  5,555  from holding NRG Energy or generate 46.93% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

AGL Energy  vs.  NRG Energy

AGL Energy

Risk-Adjusted Performance

Weakest

Over the last 90 days AGL Energy has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, AGL Energy is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

NRG Energy

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in NRG Energy are ranked lower than 14 (%) 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 AGL Energy and NRG Energy

The main advantage of trading using opposite AGL Energy and NRG Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AGL Energy 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 AGL Energy 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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.