Correlation Between Entergy Arkansas and STRATS SM
Can any of the company-specific risk be diversified away by investing in both Entergy Arkansas and STRATS SM 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 Entergy Arkansas and STRATS SM into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Entergy Arkansas LLC and STRATS SM Trust, you can compare the effects of market volatilities on Entergy Arkansas and STRATS SM 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 Entergy Arkansas with a short position of STRATS SM. Check out your portfolio center. Please also check ongoing floating volatility patterns of Entergy Arkansas and STRATS SM.
Diversification Opportunities for Entergy Arkansas and STRATS SM
-0.34 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Entergy and STRATS is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding Entergy Arkansas LLC and STRATS SM Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on STRATS SM Trust and Entergy Arkansas 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 Entergy Arkansas LLC are associated (or correlated) with STRATS SM. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of STRATS SM Trust has no effect on the direction of Entergy Arkansas i.e., Entergy Arkansas and STRATS SM go up and down completely randomly.
Pair Corralation between Entergy Arkansas and STRATS SM
Considering the 90-day investment horizon Entergy Arkansas is expected to generate 2.79 times less return on investment than STRATS SM. In addition to that, Entergy Arkansas is 1.0 times more volatile than STRATS SM Trust. It trades about 0.02 of its total potential returns per unit of risk. STRATS SM Trust is currently generating about 0.07 per unit of volatility. If you would invest 1,905 in STRATS SM Trust on November 26, 2024 and sell it today you would earn a total of 391.00 from holding STRATS SM Trust or generate 20.52% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Insignificant |
Accuracy | 70.71% |
Values | Daily Returns |
Entergy Arkansas LLC vs. STRATS SM Trust
Performance |
Timeline |
Entergy Arkansas LLC |
STRATS SM Trust |
Entergy Arkansas and STRATS SM Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Entergy Arkansas and STRATS SM
The main advantage of trading using opposite Entergy Arkansas and STRATS SM positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Entergy Arkansas position performs unexpectedly, STRATS SM 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 STRATS SM will offset losses from the drop in STRATS SM's long position.Entergy Arkansas vs. Entergy Mississippi LLC | ||
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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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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