Correlation Between CN MODERN and CenterPoint Energy
Can any of the company-specific risk be diversified away by investing in both CN MODERN and CenterPoint 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 CN MODERN and CenterPoint Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between CN MODERN DAIRY and CenterPoint Energy, you can compare the effects of market volatilities on CN MODERN and CenterPoint 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 CN MODERN with a short position of CenterPoint Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of CN MODERN and CenterPoint Energy.
Diversification Opportunities for CN MODERN and CenterPoint Energy
0.46 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between 07M and CenterPoint is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding CN MODERN DAIRY and CenterPoint Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CenterPoint Energy and CN MODERN 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 CN MODERN DAIRY are associated (or correlated) with CenterPoint Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CenterPoint Energy has no effect on the direction of CN MODERN i.e., CN MODERN and CenterPoint Energy go up and down completely randomly.
Pair Corralation between CN MODERN and CenterPoint Energy
Assuming the 90 days trading horizon CN MODERN DAIRY is expected to under-perform the CenterPoint Energy. In addition to that, CN MODERN is 1.47 times more volatile than CenterPoint Energy. It trades about -0.04 of its total potential returns per unit of risk. CenterPoint Energy is currently generating about 0.2 per unit of volatility. If you would invest 2,780 in CenterPoint Energy on September 12, 2024 and sell it today you would earn a total of 180.00 from holding CenterPoint Energy or generate 6.47% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
CN MODERN DAIRY vs. CenterPoint Energy
Performance |
| Timeline |
| CN MODERN DAIRY |
| CenterPoint Energy |
CN MODERN and CenterPoint Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with CN MODERN and CenterPoint Energy
The main advantage of trading using opposite CN MODERN and CenterPoint Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CN MODERN position performs unexpectedly, CenterPoint 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 CenterPoint Energy will offset losses from the drop in CenterPoint Energy's long position.The idea behind CN MODERN DAIRY and CenterPoint 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.| CenterPoint Energy vs. ScanSource | CenterPoint Energy vs. China Resources Beer | CenterPoint Energy vs. Eidesvik Offshore ASA | CenterPoint Energy vs. Suntory Beverage Food |
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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.
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