Correlation Between CenterPoint Energy and ISPIM

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Can any of the company-specific risk be diversified away by investing in both CenterPoint Energy and ISPIM 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 ISPIM into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between CenterPoint Energy and ISPIM 77, you can compare the effects of market volatilities on CenterPoint Energy and ISPIM 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 ISPIM. Check out your portfolio center. Please also check ongoing floating volatility patterns of CenterPoint Energy and ISPIM.

Diversification Opportunities for CenterPoint Energy and ISPIM

0.05
  Correlation Coefficient

Significant diversification

The 3 months correlation between CenterPoint and ISPIM is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding CenterPoint Energy and ISPIM 77 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ISPIM 77 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 ISPIM. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ISPIM 77 has no effect on the direction of CenterPoint Energy i.e., CenterPoint Energy and ISPIM go up and down completely randomly.

Pair Corralation between CenterPoint Energy and ISPIM

Considering the 90-day investment horizon CenterPoint Energy is expected to generate 25.69 times more return on investment than ISPIM. However, CenterPoint Energy is 25.69 times more volatile than ISPIM 77. It trades about 0.18 of its potential returns per unit of risk. ISPIM 77 is currently generating about -0.09 per unit of risk. If you would invest  2,741  in CenterPoint Energy on September 12, 2024 and sell it today you would earn a total of  403.00  from holding CenterPoint Energy or generate 14.7% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthInsignificant
Accuracy98.44%
ValuesDaily Returns

CenterPoint Energy  vs.  ISPIM 77

 Performance 
       Timeline  
CenterPoint Energy 

Risk-Adjusted Performance

14 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in CenterPoint Energy are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Even with relatively conflicting basic indicators, CenterPoint Energy reported solid returns over the last few months and may actually be approaching a breakup point.
ISPIM 77 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days ISPIM 77 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, ISPIM is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

CenterPoint Energy and ISPIM Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with CenterPoint Energy and ISPIM

The main advantage of trading using opposite CenterPoint Energy and ISPIM positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CenterPoint Energy position performs unexpectedly, ISPIM 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 ISPIM will offset losses from the drop in ISPIM's long position.
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The idea behind CenterPoint Energy and ISPIM 77 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.
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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 Stocks Directory module to find actively traded stocks across global markets.

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