Correlation Between Entergy and Eversource Energy
Can any of the company-specific risk be diversified away by investing in both Entergy and Eversource Energy 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 and Eversource Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Entergy and Eversource Energy, you can compare the effects of market volatilities on Entergy and Eversource Energy 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 with a short position of Eversource Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Entergy and Eversource Energy.
Diversification Opportunities for Entergy and Eversource Energy
-0.76 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Entergy and Eversource is -0.76. Overlapping area represents the amount of risk that can be diversified away by holding Entergy and Eversource Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eversource Energy and Entergy 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 are associated (or correlated) with Eversource Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eversource Energy has no effect on the direction of Entergy i.e., Entergy and Eversource Energy go up and down completely randomly.
Pair Corralation between Entergy and Eversource Energy
Considering the 90-day investment horizon Entergy is expected to generate 2.66 times more return on investment than Eversource Energy. However, Entergy is 2.66 times more volatile than Eversource Energy. It trades about 0.17 of its potential returns per unit of risk. Eversource Energy is currently generating about -0.12 per unit of risk. If you would invest 13,522 in Entergy on August 27, 2024 and sell it today you would earn a total of 1,728 from holding Entergy or generate 12.78% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Entergy vs. Eversource Energy
Performance |
| Timeline |
| Entergy |
| Eversource Energy |
Entergy and Eversource Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Entergy and Eversource Energy
The main advantage of trading using opposite Entergy and Eversource Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Entergy position performs unexpectedly, Eversource Energy 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 Eversource Energy will offset losses from the drop in Eversource Energy's long position.The idea behind Entergy and Eversource Energy 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.| 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.
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