Correlation Between AutoZone and NORTHEAST UTILITIES
Can any of the company-specific risk be diversified away by investing in both AutoZone 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 AutoZone and NORTHEAST UTILITIES into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between AutoZone and NORTHEAST UTILITIES, you can compare the effects of market volatilities on AutoZone 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 AutoZone with a short position of NORTHEAST UTILITIES. Check out your portfolio center. Please also check ongoing floating volatility patterns of AutoZone and NORTHEAST UTILITIES.
Diversification Opportunities for AutoZone and NORTHEAST UTILITIES
-0.2 | Correlation Coefficient |
Good diversification
The 3 months correlation between AutoZone and NORTHEAST is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding AutoZone and NORTHEAST UTILITIES in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NORTHEAST UTILITIES and AutoZone 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 AutoZone 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 AutoZone i.e., AutoZone and NORTHEAST UTILITIES go up and down completely randomly.
Pair Corralation between AutoZone and NORTHEAST UTILITIES
Assuming the 90 days horizon AutoZone is expected to generate 1.96 times more return on investment than NORTHEAST UTILITIES. However, AutoZone is 1.96 times more volatile than NORTHEAST UTILITIES. It trades about 0.2 of its potential returns per unit of risk. NORTHEAST UTILITIES is currently generating about 0.21 per unit of risk. If you would invest 279,800 in AutoZone on September 4, 2024 and sell it today you would earn a total of 23,500 from holding AutoZone or generate 8.4% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 95.45% |
| Values | Daily Returns |
AutoZone vs. NORTHEAST UTILITIES
Performance |
| Timeline |
| AutoZone |
| NORTHEAST UTILITIES |
AutoZone and NORTHEAST UTILITIES Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with AutoZone and NORTHEAST UTILITIES
The main advantage of trading using opposite AutoZone and NORTHEAST UTILITIES positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AutoZone 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.| AutoZone vs. Perseus Mining Limited | AutoZone vs. Lion One Metals | AutoZone vs. MCEWEN MINING INC | AutoZone vs. CVR Medical Corp |
| NORTHEAST UTILITIES vs. TOTAL GABON | NORTHEAST UTILITIES vs. Walgreens Boots Alliance | NORTHEAST UTILITIES vs. Peak Resources Limited |
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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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