Correlation Between Celestica and NSTAR Electric
Can any of the company-specific risk be diversified away by investing in both Celestica 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 Celestica and NSTAR Electric into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Celestica and NSTAR Electric, you can compare the effects of market volatilities on Celestica 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 Celestica with a short position of NSTAR Electric. Check out your portfolio center. Please also check ongoing floating volatility patterns of Celestica and NSTAR Electric.
Diversification Opportunities for Celestica and NSTAR Electric
0.72 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Celestica and NSTAR is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Celestica and NSTAR Electric in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NSTAR Electric and Celestica 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 Celestica 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 Celestica i.e., Celestica and NSTAR Electric go up and down completely randomly.
Pair Corralation between Celestica and NSTAR Electric
Considering the 90-day investment horizon Celestica is expected to generate 1.74 times more return on investment than NSTAR Electric. However, Celestica is 1.74 times more volatile than NSTAR Electric. It trades about 0.16 of its potential returns per unit of risk. NSTAR Electric is currently generating about -0.01 per unit of risk. If you would invest 1,605 in Celestica on September 12, 2024 and sell it today you would earn a total of 7,195 from holding Celestica or generate 448.29% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 60.51% |
| Values | Daily Returns |
Celestica vs. NSTAR Electric
Performance |
| Timeline |
| Celestica |
| NSTAR Electric |
Celestica and NSTAR Electric Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Celestica and NSTAR Electric
The main advantage of trading using opposite Celestica and NSTAR Electric positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Celestica 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.The idea behind Celestica and NSTAR Electric 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.| NSTAR Electric vs. NRG Energy | NSTAR Electric vs. United Utilities Group | NSTAR Electric vs. Celestica | NSTAR Electric vs. United Microelectronics |
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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.
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