Correlation Between Eversource Energy and Otter Tail
Can any of the company-specific risk be diversified away by investing in both Eversource Energy and Otter Tail 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 Otter Tail into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Eversource Energy and Otter Tail, you can compare the effects of market volatilities on Eversource Energy and Otter Tail 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 Otter Tail. Check out your portfolio center. Please also check ongoing floating volatility patterns of Eversource Energy and Otter Tail.
Diversification Opportunities for Eversource Energy and Otter Tail
-0.35 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Eversource and Otter is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding Eversource Energy and Otter Tail in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Otter Tail 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 Otter Tail. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Otter Tail has no effect on the direction of Eversource Energy i.e., Eversource Energy and Otter Tail go up and down completely randomly.
Pair Corralation between Eversource Energy and Otter Tail
Allowing for the 90-day total investment horizon Eversource Energy is expected to under-perform the Otter Tail. But the stock apears to be less risky and, when comparing its historical volatility, Eversource Energy is 1.59 times less risky than Otter Tail. The stock trades about -0.11 of its potential returns per unit of risk. The Otter Tail is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 7,807 in Otter Tail on September 4, 2024 and sell it today you would earn a total of 282.00 from holding Otter Tail or generate 3.61% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Eversource Energy vs. Otter Tail
Performance |
| Timeline |
| Eversource Energy |
| Otter Tail |
Eversource Energy and Otter Tail Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Eversource Energy and Otter Tail
The main advantage of trading using opposite Eversource Energy and Otter Tail positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Eversource Energy position performs unexpectedly, Otter Tail 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 Otter Tail will offset losses from the drop in Otter Tail's long position.| Eversource Energy vs. CenterPoint Energy | Eversource Energy vs. FirstEnergy | Eversource Energy vs. Pinnacle West Capital | Eversource Energy vs. Edison International |
| Otter Tail vs. NorthWestern | Otter Tail vs. Avista | Otter Tail vs. Black Hills | Otter Tail vs. Companhia Paranaense de |
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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.
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