Correlation Between Eversource Energy and Middlesex Water
Can any of the company-specific risk be diversified away by investing in both Eversource Energy and Middlesex Water 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 Middlesex Water into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Eversource Energy and Middlesex Water, you can compare the effects of market volatilities on Eversource Energy and Middlesex Water 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 Middlesex Water. Check out your portfolio center. Please also check ongoing floating volatility patterns of Eversource Energy and Middlesex Water.
Diversification Opportunities for Eversource Energy and Middlesex Water
-0.51 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Eversource and Middlesex is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding Eversource Energy and Middlesex Water in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Middlesex Water 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 Middlesex Water. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Middlesex Water has no effect on the direction of Eversource Energy i.e., Eversource Energy and Middlesex Water go up and down completely randomly.
Pair Corralation between Eversource Energy and Middlesex Water
Allowing for the 90-day total investment horizon Eversource Energy is expected to under-perform the Middlesex Water. But the stock apears to be less risky and, when comparing its historical volatility, Eversource Energy is 1.84 times less risky than Middlesex Water. The stock trades about -0.04 of its potential returns per unit of risk. The Middlesex Water is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest 6,216 in Middlesex Water on August 31, 2024 and sell it today you would earn a total of 316.00 from holding Middlesex Water or generate 5.08% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Eversource Energy vs. Middlesex Water
Performance |
| Timeline |
| Eversource Energy |
| Middlesex Water |
Eversource Energy and Middlesex Water Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Eversource Energy and Middlesex Water
The main advantage of trading using opposite Eversource Energy and Middlesex Water positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Eversource Energy position performs unexpectedly, Middlesex Water 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 Middlesex Water will offset losses from the drop in Middlesex Water's long position.| Eversource Energy vs. CenterPoint Energy | Eversource Energy vs. FirstEnergy | Eversource Energy vs. Pinnacle West Capital | Eversource Energy vs. Edison International |
| Middlesex Water vs. California Water Service | Middlesex Water vs. Consolidated Water Co | Middlesex Water vs. SJW Group Common | Middlesex Water vs. The York Water |
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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.
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