Correlation Between Entergy Texas and Spire
Can any of the company-specific risk be diversified away by investing in both Entergy Texas and Spire 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 Texas and Spire into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Entergy Texas and Spire Inc, you can compare the effects of market volatilities on Entergy Texas and Spire 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 Texas with a short position of Spire. Check out your portfolio center. Please also check ongoing floating volatility patterns of Entergy Texas and Spire.
Diversification Opportunities for Entergy Texas and Spire
0.5 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Entergy and Spire is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Entergy Texas and Spire Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Spire Inc and Entergy Texas 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 Texas are associated (or correlated) with Spire. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Spire Inc has no effect on the direction of Entergy Texas i.e., Entergy Texas and Spire go up and down completely randomly.
Pair Corralation between Entergy Texas and Spire
Assuming the 90 days horizon Entergy Texas is expected to generate 1.1 times less return on investment than Spire. In addition to that, Entergy Texas is 1.98 times more volatile than Spire Inc. It trades about 0.09 of its total potential returns per unit of risk. Spire Inc is currently generating about 0.2 per unit of volatility. If you would invest 2,399 in Spire Inc on November 9, 2024 and sell it today you would earn a total of 52.00 from holding Spire Inc or generate 2.17% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Entergy Texas vs. Spire Inc
Performance |
| Timeline |
| Entergy Texas |
| Spire Inc |
Entergy Texas and Spire Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Entergy Texas and Spire
The main advantage of trading using opposite Entergy Texas and Spire positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Entergy Texas position performs unexpectedly, Spire 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 Spire will offset losses from the drop in Spire's long position.The idea behind Entergy Texas and Spire Inc pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.
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