Correlation Between Connecticut Light and GMS
Can any of the company-specific risk be diversified away by investing in both Connecticut Light and GMS 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 GMS 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 GMS Inc, you can compare the effects of market volatilities on Connecticut Light and GMS 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 GMS. Check out your portfolio center. Please also check ongoing floating volatility patterns of Connecticut Light and GMS.
Diversification Opportunities for Connecticut Light and GMS
-0.55 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Connecticut and GMS is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding The Connecticut Light and GMS Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GMS Inc 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 GMS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GMS Inc has no effect on the direction of Connecticut Light i.e., Connecticut Light and GMS go up and down completely randomly.
Pair Corralation between Connecticut Light and GMS
Assuming the 90 days horizon The Connecticut Light is expected to generate 0.31 times more return on investment than GMS. However, The Connecticut Light is 3.22 times less risky than GMS. It trades about 0.11 of its potential returns per unit of risk. GMS Inc is currently generating about -0.23 per unit of risk. If you would invest 3,362 in The Connecticut Light on September 13, 2024 and sell it today you would earn a total of 38.00 from holding The Connecticut Light or generate 1.13% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 95.45% |
| Values | Daily Returns |
The Connecticut Light vs. GMS Inc
Performance |
| Timeline |
| Connecticut Light |
| GMS Inc |
Connecticut Light and GMS Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Connecticut Light and GMS
The main advantage of trading using opposite Connecticut Light and GMS positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Connecticut Light position performs unexpectedly, GMS 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 GMS will offset losses from the drop in GMS's long position.| Connecticut Light vs. Avangrid | Connecticut Light vs. Dominion Energy | Connecticut Light vs. Centrais Electricas Brasileiras | Connecticut Light vs. Enel Chile SA |
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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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
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