Correlation Between Connecticut Light and Consumers Energy
Can any of the company-specific risk be diversified away by investing in both Connecticut Light and Consumers Energy 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 Consumers Energy 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 Consumers Energy, you can compare the effects of market volatilities on Connecticut Light and Consumers Energy 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 Consumers Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Connecticut Light and Consumers Energy.
Diversification Opportunities for Connecticut Light and Consumers Energy
0.66 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Connecticut and Consumers is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding The Connecticut Light and Consumers Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Consumers Energy 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 Consumers Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Consumers Energy has no effect on the direction of Connecticut Light i.e., Connecticut Light and Consumers Energy go up and down completely randomly.
Pair Corralation between Connecticut Light and Consumers Energy
Assuming the 90 days horizon The Connecticut Light is expected to generate 1.14 times more return on investment than Consumers Energy. However, Connecticut Light is 1.14 times more volatile than Consumers Energy. It trades about -0.14 of its potential returns per unit of risk. Consumers Energy is currently generating about -0.19 per unit of risk. If you would invest 4,300 in The Connecticut Light on August 29, 2024 and sell it today you would lose (200.00) from holding The Connecticut Light or give up 4.65% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
The Connecticut Light vs. Consumers Energy
Performance |
| Timeline |
| Connecticut Light |
| Consumers Energy |
Connecticut Light and Consumers Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Connecticut Light and Consumers Energy
The main advantage of trading using opposite Connecticut Light and Consumers Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Connecticut Light position performs unexpectedly, Consumers Energy 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 Consumers Energy will offset losses from the drop in Consumers Energy's long position.| Connecticut Light vs. Red Electrica Corporacion | Connecticut Light vs. Centrais Eltricas Brasileiras | Connecticut Light vs. Centrais Electricas Brasileiras | Connecticut Light vs. Enel Chile SA |
| Consumers Energy vs. Nextera Energy | Consumers Energy vs. Duke Energy | Consumers Energy vs. PGE Corp | Consumers Energy vs. Southern Company |
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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.
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