Correlation Between Connecticut Light and Southern
Can any of the company-specific risk be diversified away by investing in both Connecticut Light and Southern 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 Connecticut Light and Southern into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between The Connecticut Light and Southern Company, you can compare the effects of market volatilities on Connecticut Light and Southern 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 Connecticut Light with a short position of Southern. Check out your portfolio center. Please also check ongoing floating volatility patterns of Connecticut Light and Southern.
Diversification Opportunities for Connecticut Light and Southern
0.33 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Connecticut and Southern is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding The Connecticut Light and Southern Company in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Southern and Connecticut Light 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 The Connecticut Light are associated (or correlated) with Southern. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Southern has no effect on the direction of Connecticut Light i.e., Connecticut Light and Southern go up and down completely randomly.
Pair Corralation between Connecticut Light and Southern
Assuming the 90 days horizon The Connecticut Light is expected to generate 1.55 times more return on investment than Southern. However, Connecticut Light is 1.55 times more volatile than Southern Company. It trades about 0.04 of its potential returns per unit of risk. Southern Company is currently generating about -0.05 per unit of risk. If you would invest 3,800 in The Connecticut Light on September 1, 2024 and sell it today you would earn a total of 50.00 from holding The Connecticut Light or generate 1.32% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 95.45% |
| Values | Daily Returns |
The Connecticut Light vs. Southern Company
Performance |
| Timeline |
| Connecticut Light |
| Southern |
Connecticut Light and Southern Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Connecticut Light and Southern
The main advantage of trading using opposite Connecticut Light and Southern positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Connecticut Light position performs unexpectedly, Southern 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 Southern will offset losses from the drop in Southern's long position.| Connecticut Light vs. Southern Company | Connecticut Light vs. Duke Energy | Connecticut Light vs. Duke Energy | Connecticut Light vs. National Grid PLC |
| Southern vs. Dominion Energy | Southern vs. American Electric Power | Southern vs. Nextera Energy | Southern vs. Consolidated Edison |
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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.
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