Correlation Between NRG Energy, and SK Telecom

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

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

Diversification Opportunities for NRG Energy, and SK Telecom

0.67

Correlation Coefficient

NRG Energy,  SK Telecom

Poor diversification

The 3 months correlation between NRG and S1KM34 is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding NRG Energy, and SK Telecom Co, in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SK Telecom Co, 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 SK Telecom. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SK Telecom Co, has no effect on the direction of NRG Energy, i.e., NRG Energy, and SK Telecom go up and down completely randomly.

Pair Corralation between NRG Energy, and SK Telecom

Assuming the 90 days trading horizon NRG Energy, is expected to under-perform the SK Telecom. In addition to that, NRG Energy, is 2.18 times more volatile than SK Telecom Co,. It trades about -0.12 of its total potential returns per unit of risk. SK Telecom Co, is currently generating about -0.12 per unit of volatility. If you would invest  3,424  in SK Telecom Co, on October 6, 2024 and sell it today you would lose (103.00) from holding SK Telecom Co, or give up 3.01% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	94.74%
Values	Daily Returns

NRG Energy,  vs.  SK Telecom Co,

NRG Energy,

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in NRG Energy, are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, NRG Energy, may actually be approaching a critical reversion point that can send shares even higher in February 2025.

SK Telecom Co,

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in SK Telecom Co, are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong forward-looking signals, SK Telecom is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with NRG Energy, and SK Telecom

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

The idea behind NRG Energy, and SK Telecom Co, 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.