Correlation Between Connecticut Light and NSTAR Electric
Can any of the company-specific risk be diversified away by investing in both Connecticut Light and NSTAR Electric 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 NSTAR Electric 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 NSTAR Electric, you can compare the effects of market volatilities on Connecticut Light and NSTAR Electric 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 NSTAR Electric. Check out your portfolio center. Please also check ongoing floating volatility patterns of Connecticut Light and NSTAR Electric.
Diversification Opportunities for Connecticut Light and NSTAR Electric
0.07 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Connecticut and NSTAR is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding The Connecticut Light and NSTAR Electric in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NSTAR Electric 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 NSTAR Electric. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NSTAR Electric has no effect on the direction of Connecticut Light i.e., Connecticut Light and NSTAR Electric go up and down completely randomly.
Pair Corralation between Connecticut Light and NSTAR Electric
Assuming the 90 days horizon The Connecticut Light is expected to under-perform the NSTAR Electric. In addition to that, Connecticut Light is 8.96 times more volatile than NSTAR Electric. It trades about -0.14 of its total potential returns per unit of risk. NSTAR Electric is currently generating about 0.21 per unit of volatility. If you would invest 8,350 in NSTAR Electric on September 12, 2024 and sell it today you would earn a total of 50.00 from holding NSTAR Electric or generate 0.6% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
The Connecticut Light vs. NSTAR Electric
Performance |
| Timeline |
| Connecticut Light |
| NSTAR Electric |
Connecticut Light and NSTAR Electric Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Connecticut Light and NSTAR Electric
The main advantage of trading using opposite Connecticut Light and NSTAR Electric positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Connecticut Light position performs unexpectedly, NSTAR Electric 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 NSTAR Electric will offset losses from the drop in NSTAR Electric's long position.| Connecticut Light vs. PacifiCorp | Connecticut Light vs. The Connecticut Light | Connecticut Light vs. The Connecticut Light | Connecticut Light vs. The Connecticut Light |
| NSTAR Electric vs. NRG Energy | NSTAR Electric vs. United Utilities Group | NSTAR Electric vs. Celestica | NSTAR Electric vs. United Microelectronics |
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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.
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