Correlation Between Eversource Energy and Utilities Portfolio
Can any of the company-specific risk be diversified away by investing in both Eversource Energy and Utilities Portfolio 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 Eversource Energy and Utilities Portfolio into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Eversource Energy and Utilities Portfolio Utilities, you can compare the effects of market volatilities on Eversource Energy and Utilities Portfolio 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 Eversource Energy with a short position of Utilities Portfolio. Check out your portfolio center. Please also check ongoing floating volatility patterns of Eversource Energy and Utilities Portfolio.
Diversification Opportunities for Eversource Energy and Utilities Portfolio
0.64 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Eversource and Utilities is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Eversource Energy and Utilities Portfolio Utilities in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Utilities Portfolio and Eversource 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 Eversource Energy are associated (or correlated) with Utilities Portfolio. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Utilities Portfolio has no effect on the direction of Eversource Energy i.e., Eversource Energy and Utilities Portfolio go up and down completely randomly.
Pair Corralation between Eversource Energy and Utilities Portfolio
Allowing for the 90-day total investment horizon Eversource Energy is expected to generate 1.04 times more return on investment than Utilities Portfolio. However, Eversource Energy is 1.04 times more volatile than Utilities Portfolio Utilities. It trades about 0.09 of its potential returns per unit of risk. Utilities Portfolio Utilities is currently generating about 0.02 per unit of risk. If you would invest 5,623 in Eversource Energy on November 5, 2024 and sell it today you would earn a total of 145.00 from holding Eversource Energy or generate 2.58% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Eversource Energy vs. Utilities Portfolio Utilities
Performance |
| Timeline |
| Eversource Energy |
| Utilities Portfolio |
Eversource Energy and Utilities Portfolio Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Eversource Energy and Utilities Portfolio
The main advantage of trading using opposite Eversource Energy and Utilities Portfolio positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Eversource Energy position performs unexpectedly, Utilities Portfolio 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 Utilities Portfolio will offset losses from the drop in Utilities Portfolio's long position.| Eversource Energy vs. CenterPoint Energy | Eversource Energy vs. FirstEnergy | Eversource Energy vs. Pinnacle West Capital | Eversource Energy vs. Edison International |
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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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