Correlation Between American Funds and NSTAR Electric
Can any of the company-specific risk be diversified away by investing in both American Funds and NSTAR Electric 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 American Funds and NSTAR Electric into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between American Funds Fundamental and NSTAR Electric, you can compare the effects of market volatilities on American Funds and NSTAR Electric 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 American Funds with a short position of NSTAR Electric. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Funds and NSTAR Electric.
Diversification Opportunities for American Funds and NSTAR Electric
0.4 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between American and NSTAR is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding American Funds Fundamental and NSTAR Electric in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NSTAR Electric and American Funds 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 American Funds Fundamental are associated (or correlated) with NSTAR Electric. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NSTAR Electric has no effect on the direction of American Funds i.e., American Funds and NSTAR Electric go up and down completely randomly.
Pair Corralation between American Funds and NSTAR Electric
Assuming the 90 days horizon American Funds Fundamental is expected to generate 0.82 times more return on investment than NSTAR Electric. However, American Funds Fundamental is 1.22 times less risky than NSTAR Electric. It trades about 0.14 of its potential returns per unit of risk. NSTAR Electric is currently generating about -0.08 per unit of risk. If you would invest 8,194 in American Funds Fundamental on November 4, 2024 and sell it today you would earn a total of 224.00 from holding American Funds Fundamental or generate 2.73% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
American Funds Fundamental vs. NSTAR Electric
Performance |
| Timeline |
| American Funds Funda |
| NSTAR Electric |
American Funds and NSTAR Electric Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Funds and NSTAR Electric
The main advantage of trading using opposite American Funds and NSTAR Electric positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Funds position performs unexpectedly, NSTAR Electric 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 NSTAR Electric will offset losses from the drop in NSTAR Electric's long position.| American Funds vs. World Energy Fund | American Funds vs. Energy Services Fund | American Funds vs. Alpsalerian Energy Infrastructure | American Funds vs. Icon Natural Resources |
| NSTAR Electric vs. Norfolk Southern | NSTAR Electric vs. CleanGo Innovations | NSTAR Electric vs. RBC Bearings Incorporated | NSTAR Electric vs. Delek Logistics Partners |
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 CEOs Directory module to screen CEOs from public companies around the world.
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