Correlation Between CenterPoint Energy and NorthWestern
Can any of the company-specific risk be diversified away by investing in both CenterPoint Energy and NorthWestern 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 CenterPoint Energy and NorthWestern into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between CenterPoint Energy and NorthWestern, you can compare the effects of market volatilities on CenterPoint Energy and NorthWestern 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 CenterPoint Energy with a short position of NorthWestern. Check out your portfolio center. Please also check ongoing floating volatility patterns of CenterPoint Energy and NorthWestern.
Diversification Opportunities for CenterPoint Energy and NorthWestern
0.46 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between CenterPoint and NorthWestern is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding CenterPoint Energy and NorthWestern in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NorthWestern and CenterPoint 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 CenterPoint Energy are associated (or correlated) with NorthWestern. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NorthWestern has no effect on the direction of CenterPoint Energy i.e., CenterPoint Energy and NorthWestern go up and down completely randomly.
Pair Corralation between CenterPoint Energy and NorthWestern
Considering the 90-day investment horizon CenterPoint Energy is expected to generate 1.2 times more return on investment than NorthWestern. However, CenterPoint Energy is 1.2 times more volatile than NorthWestern. It trades about 0.28 of its potential returns per unit of risk. NorthWestern is currently generating about 0.11 per unit of risk. If you would invest 2,955 in CenterPoint Energy on August 28, 2024 and sell it today you would earn a total of 293.00 from holding CenterPoint Energy or generate 9.92% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
CenterPoint Energy vs. NorthWestern
Performance |
| Timeline |
| CenterPoint Energy |
| NorthWestern |
CenterPoint Energy and NorthWestern Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with CenterPoint Energy and NorthWestern
The main advantage of trading using opposite CenterPoint Energy and NorthWestern positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CenterPoint Energy position performs unexpectedly, NorthWestern 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 NorthWestern will offset losses from the drop in NorthWestern's long position.| CenterPoint Energy vs. Entergy | CenterPoint Energy vs. Alliant Energy Corp | CenterPoint Energy vs. Pinnacle West Capital | CenterPoint Energy vs. MGE Energy |
| NorthWestern vs. Allete Inc | NorthWestern vs. Black Hills | NorthWestern vs. Otter Tail | NorthWestern vs. Avista |
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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.
Other Complementary Tools
| Equity Search Search for actively traded equities including funds and ETFs from over 30 global markets | |
| Equity Analysis Research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities | |
| Volatility Analysis Get historical volatility and risk analysis based on latest market data | |
| Portfolio Rebalancing Analyze risk-adjusted returns against different time horizons to find asset-allocation targets | |
| Stock Screener Find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook. |