Correlation Between EDP Energias and NorthWestern
Can any of the company-specific risk be diversified away by investing in both EDP Energias and NorthWestern 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 EDP Energias and NorthWestern into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between EDP Energias de and NorthWestern, you can compare the effects of market volatilities on EDP Energias and NorthWestern 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 EDP Energias with a short position of NorthWestern. Check out your portfolio center. Please also check ongoing floating volatility patterns of EDP Energias and NorthWestern.
Diversification Opportunities for EDP Energias and NorthWestern
0.27 | Correlation Coefficient |
Modest diversification
The 3 months correlation between EDP and NorthWestern is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding EDP Energias de and NorthWestern in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NorthWestern and EDP Energias 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 EDP Energias de are associated (or correlated) with NorthWestern. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NorthWestern has no effect on the direction of EDP Energias i.e., EDP Energias and NorthWestern go up and down completely randomly.
Pair Corralation between EDP Energias and NorthWestern
Assuming the 90 days horizon EDP Energias de is expected to under-perform the NorthWestern. In addition to that, EDP Energias is 1.54 times more volatile than NorthWestern. It trades about -0.16 of its total potential returns per unit of risk. NorthWestern is currently generating about 0.11 per unit of volatility. If you would invest 5,346 in NorthWestern on September 1, 2024 and sell it today you would earn a total of 178.00 from holding NorthWestern or generate 3.33% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 95.45% |
| Values | Daily Returns |
EDP Energias de vs. NorthWestern
Performance |
| Timeline |
| EDP Energias de |
| NorthWestern |
EDP Energias and NorthWestern Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with EDP Energias and NorthWestern
The main advantage of trading using opposite EDP Energias and NorthWestern positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if EDP Energias position performs unexpectedly, NorthWestern 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 NorthWestern will offset losses from the drop in NorthWestern's long position.| EDP Energias vs. RWE AG PK | EDP Energias vs. Iberdrola SA | EDP Energias vs. ENEL Societa per | EDP Energias vs. SSE PLC ADR |
| NorthWestern vs. Allete Inc | NorthWestern vs. Black Hills | NorthWestern vs. Otter Tail | NorthWestern vs. Avista |
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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