Correlation Between CITY OFFICE and NORTHEAST UTILITIES
Can any of the company-specific risk be diversified away by investing in both CITY OFFICE and NORTHEAST UTILITIES 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 CITY OFFICE and NORTHEAST UTILITIES into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between CITY OFFICE REIT and NORTHEAST UTILITIES, you can compare the effects of market volatilities on CITY OFFICE and NORTHEAST UTILITIES 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 CITY OFFICE with a short position of NORTHEAST UTILITIES. Check out your portfolio center. Please also check ongoing floating volatility patterns of CITY OFFICE and NORTHEAST UTILITIES.
Diversification Opportunities for CITY OFFICE and NORTHEAST UTILITIES
0.5 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between CITY and NORTHEAST is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding CITY OFFICE REIT and NORTHEAST UTILITIES in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NORTHEAST UTILITIES and CITY OFFICE 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 CITY OFFICE REIT are associated (or correlated) with NORTHEAST UTILITIES. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NORTHEAST UTILITIES has no effect on the direction of CITY OFFICE i.e., CITY OFFICE and NORTHEAST UTILITIES go up and down completely randomly.
Pair Corralation between CITY OFFICE and NORTHEAST UTILITIES
Assuming the 90 days horizon CITY OFFICE REIT is expected to generate 2.65 times more return on investment than NORTHEAST UTILITIES. However, CITY OFFICE is 2.65 times more volatile than NORTHEAST UTILITIES. It trades about 0.24 of its potential returns per unit of risk. NORTHEAST UTILITIES is currently generating about 0.06 per unit of risk. If you would invest 472.00 in CITY OFFICE REIT on August 31, 2024 and sell it today you would earn a total of 88.00 from holding CITY OFFICE REIT or generate 18.64% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
CITY OFFICE REIT vs. NORTHEAST UTILITIES
Performance |
| Timeline |
| CITY OFFICE REIT |
| NORTHEAST UTILITIES |
CITY OFFICE and NORTHEAST UTILITIES Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with CITY OFFICE and NORTHEAST UTILITIES
The main advantage of trading using opposite CITY OFFICE and NORTHEAST UTILITIES positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CITY OFFICE position performs unexpectedly, NORTHEAST UTILITIES 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 NORTHEAST UTILITIES will offset losses from the drop in NORTHEAST UTILITIES's long position.| CITY OFFICE vs. Columbia Sportswear | CITY OFFICE vs. INTERSHOP Communications Aktiengesellschaft | CITY OFFICE vs. Charter Communications | CITY OFFICE vs. KOOL2PLAY SA ZY |
| NORTHEAST UTILITIES vs. STRAYER EDUCATION | NORTHEAST UTILITIES vs. REINET INVESTMENTS SCA | NORTHEAST UTILITIES vs. Virtus Investment Partners | NORTHEAST UTILITIES vs. Apollo Investment Corp |
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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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