Correlation Between NRG Energy and Coupang LLC
Can any of the company-specific risk be diversified away by investing in both NRG Energy and Coupang LLC 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 Coupang LLC into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NRG Energy and Coupang LLC, you can compare the effects of market volatilities on NRG Energy and Coupang LLC 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 Coupang LLC. Check out your portfolio center. Please also check ongoing floating volatility patterns of NRG Energy and Coupang LLC.
Diversification Opportunities for NRG Energy and Coupang LLC
0.6 | Correlation Coefficient |
Poor diversification
The 3 months correlation between NRG and Coupang is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding NRG Energy and Coupang LLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Coupang LLC 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 Coupang LLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Coupang LLC has no effect on the direction of NRG Energy i.e., NRG Energy and Coupang LLC go up and down completely randomly.
Pair Corralation between NRG Energy and Coupang LLC
Considering the 90-day investment horizon NRG Energy is expected to generate 0.58 times more return on investment than Coupang LLC. However, NRG Energy is 1.74 times less risky than Coupang LLC. It trades about 0.26 of its potential returns per unit of risk. Coupang LLC is currently generating about -0.04 per unit of risk. If you would invest 8,492 in NRG Energy on August 23, 2024 and sell it today you would earn a total of 960.00 from holding NRG Energy or generate 11.3% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
NRG Energy vs. Coupang LLC
Performance |
| Timeline |
| NRG Energy |
| Coupang LLC |
NRG Energy and Coupang LLC Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with NRG Energy and Coupang LLC
The main advantage of trading using opposite NRG Energy and Coupang LLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NRG Energy position performs unexpectedly, Coupang LLC 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 Coupang LLC will offset losses from the drop in Coupang LLC's long position.| NRG Energy vs. TransAlta Corp | NRG Energy vs. Kenon Holdings | NRG Energy vs. Pampa Energia SA | NRG Energy vs. AGL Energy |
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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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.
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