Correlation Between Duke Energy and National Grid
Can any of the company-specific risk be diversified away by investing in both Duke Energy and National Grid 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 Duke Energy and National Grid into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Duke Energy and National Grid PLC, you can compare the effects of market volatilities on Duke Energy and National Grid 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 Duke Energy with a short position of National Grid. Check out your portfolio center. Please also check ongoing floating volatility patterns of Duke Energy and National Grid.
Diversification Opportunities for Duke Energy and National Grid
0.5 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Duke and National is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Duke Energy and National Grid PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on National Grid PLC and Duke 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 Duke Energy are associated (or correlated) with National Grid. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of National Grid PLC has no effect on the direction of Duke Energy i.e., Duke Energy and National Grid go up and down completely randomly.
Pair Corralation between Duke Energy and National Grid
Considering the 90-day investment horizon Duke Energy is expected to generate 1.12 times more return on investment than National Grid. However, Duke Energy is 1.12 times more volatile than National Grid PLC. It trades about -0.03 of its potential returns per unit of risk. National Grid PLC is currently generating about -0.11 per unit of risk. If you would invest 11,595 in Duke Energy on August 27, 2024 and sell it today you would lose (95.00) from holding Duke Energy or give up 0.82% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Duke Energy vs. National Grid PLC
Performance |
| Timeline |
| Duke Energy |
| National Grid PLC |
Duke Energy and National Grid Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Duke Energy and National Grid
The main advantage of trading using opposite Duke Energy and National Grid positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Duke Energy position performs unexpectedly, National Grid 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 National Grid will offset losses from the drop in National Grid's long position.| Duke Energy vs. Dominion Energy | Duke Energy vs. Consolidated Edison | Duke Energy vs. Eversource Energy | Duke Energy vs. FirstEnergy |
| National Grid vs. Southern Company | National Grid vs. Edison International | National Grid vs. American Electric Power | National Grid vs. Duke Energy |
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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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