Correlation Between Coupang LLC and NRG Energy
Can any of the company-specific risk be diversified away by investing in both Coupang LLC 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 Coupang LLC and NRG Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Coupang LLC and NRG Energy, you can compare the effects of market volatilities on Coupang LLC 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 Coupang LLC with a short position of NRG Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Coupang LLC and NRG Energy.
Diversification Opportunities for Coupang LLC and NRG Energy
0.55 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Coupang and NRG is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Coupang LLC and NRG Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NRG Energy and Coupang LLC 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 Coupang LLC 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 Coupang LLC i.e., Coupang LLC and NRG Energy go up and down completely randomly.
Pair Corralation between Coupang LLC and NRG Energy
Given the investment horizon of 90 days Coupang LLC is expected to under-perform the NRG Energy. In addition to that, Coupang LLC is 1.79 times more volatile than NRG Energy. It trades about -0.06 of its total potential returns per unit of risk. NRG Energy is currently generating about 0.23 per unit of volatility. If you would invest 8,714 in NRG Energy on August 26, 2024 and sell it today you would earn a total of 834.00 from holding NRG Energy or generate 9.57% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Coupang LLC vs. NRG Energy
Performance |
| Timeline |
| Coupang LLC |
| NRG Energy |
Coupang LLC and NRG Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Coupang LLC and NRG Energy
The main advantage of trading using opposite Coupang LLC and NRG Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Coupang LLC 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.| Coupang LLC vs. Sea | Coupang LLC vs. Wayfair | Coupang LLC vs. Chewy Inc | Coupang LLC vs. Vipshop Holdings Limited |
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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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