Correlation Between Consumers Energy and Entergy New
Can any of the company-specific risk be diversified away by investing in both Consumers Energy and Entergy New 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 Consumers Energy and Entergy New into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Consumers Energy and Entergy New Orleans, you can compare the effects of market volatilities on Consumers Energy and Entergy New 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 Consumers Energy with a short position of Entergy New. Check out your portfolio center. Please also check ongoing floating volatility patterns of Consumers Energy and Entergy New.
Diversification Opportunities for Consumers Energy and Entergy New
0.79 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Consumers and Entergy is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Consumers Energy and Entergy New Orleans in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Entergy New Orleans and Consumers Energy 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 Consumers Energy are associated (or correlated) with Entergy New. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Entergy New Orleans has no effect on the direction of Consumers Energy i.e., Consumers Energy and Entergy New go up and down completely randomly.
Pair Corralation between Consumers Energy and Entergy New
Assuming the 90 days trading horizon Consumers Energy is expected to under-perform the Entergy New. In addition to that, Consumers Energy is 1.08 times more volatile than Entergy New Orleans. It trades about -0.19 of its total potential returns per unit of risk. Entergy New Orleans is currently generating about -0.1 per unit of volatility. If you would invest 2,363 in Entergy New Orleans on August 27, 2024 and sell it today you would lose (64.00) from holding Entergy New Orleans or give up 2.71% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Consumers Energy vs. Entergy New Orleans
Performance |
| Timeline |
| Consumers Energy |
| Entergy New Orleans |
Consumers Energy and Entergy New Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Consumers Energy and Entergy New
The main advantage of trading using opposite Consumers Energy and Entergy New positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Consumers Energy position performs unexpectedly, Entergy New 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 Entergy New will offset losses from the drop in Entergy New's long position.| Consumers Energy vs. Nextera Energy | Consumers Energy vs. Duke Energy | Consumers Energy vs. PGE Corp | Consumers Energy vs. Southern Company |
| Entergy New vs. Entergy New Orleans | Entergy New vs. Entergy Arkansas LLC | Entergy New vs. Entergy Mississippi LLC | Entergy New vs. Entergy Louisiana LLC |
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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.
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