Correlation Between Gamma Communications and NORTHEAST UTILITIES
Can any of the company-specific risk be diversified away by investing in both Gamma Communications 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 Gamma Communications and NORTHEAST UTILITIES into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Gamma Communications plc and NORTHEAST UTILITIES, you can compare the effects of market volatilities on Gamma Communications 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 Gamma Communications with a short position of NORTHEAST UTILITIES. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gamma Communications and NORTHEAST UTILITIES.
Diversification Opportunities for Gamma Communications and NORTHEAST UTILITIES
-0.07 | Correlation Coefficient |
Good diversification
The 3 months correlation between Gamma and NORTHEAST is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding Gamma Communications plc and NORTHEAST UTILITIES in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NORTHEAST UTILITIES and Gamma Communications 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 Gamma Communications plc 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 Gamma Communications i.e., Gamma Communications and NORTHEAST UTILITIES go up and down completely randomly.
Pair Corralation between Gamma Communications and NORTHEAST UTILITIES
Assuming the 90 days horizon Gamma Communications is expected to generate 8.09 times less return on investment than NORTHEAST UTILITIES. In addition to that, Gamma Communications is 1.13 times more volatile than NORTHEAST UTILITIES. It trades about 0.01 of its total potential returns per unit of risk. NORTHEAST UTILITIES is currently generating about 0.06 per unit of volatility. If you would invest 6,000 in NORTHEAST UTILITIES on August 31, 2024 and sell it today you would earn a total of 100.00 from holding NORTHEAST UTILITIES or generate 1.67% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Gamma Communications plc vs. NORTHEAST UTILITIES
Performance |
| Timeline |
| Gamma Communications plc |
| NORTHEAST UTILITIES |
Gamma Communications and NORTHEAST UTILITIES Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Gamma Communications and NORTHEAST UTILITIES
The main advantage of trading using opposite Gamma Communications and NORTHEAST UTILITIES positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Gamma Communications 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.| Gamma Communications vs. Performance Food Group | Gamma Communications vs. Waste Management | Gamma Communications vs. CeoTronics AG | Gamma Communications vs. Cleanaway Waste Management |
| 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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