Correlation Between IMPERIAL TOBACCO and NORTHEAST UTILITIES
Can any of the company-specific risk be diversified away by investing in both IMPERIAL TOBACCO and NORTHEAST UTILITIES 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 IMPERIAL TOBACCO and NORTHEAST UTILITIES into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between IMPERIAL TOBACCO and NORTHEAST UTILITIES, you can compare the effects of market volatilities on IMPERIAL TOBACCO and NORTHEAST UTILITIES 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 IMPERIAL TOBACCO with a short position of NORTHEAST UTILITIES. Check out your portfolio center. Please also check ongoing floating volatility patterns of IMPERIAL TOBACCO and NORTHEAST UTILITIES.
Diversification Opportunities for IMPERIAL TOBACCO and NORTHEAST UTILITIES
-0.49 | Correlation Coefficient |
Very good diversification
The 3 months correlation between IMPERIAL and NORTHEAST is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding IMPERIAL TOBACCO and NORTHEAST UTILITIES in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NORTHEAST UTILITIES and IMPERIAL TOBACCO 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 IMPERIAL TOBACCO are associated (or correlated) with NORTHEAST UTILITIES. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NORTHEAST UTILITIES has no effect on the direction of IMPERIAL TOBACCO i.e., IMPERIAL TOBACCO and NORTHEAST UTILITIES go up and down completely randomly.
Pair Corralation between IMPERIAL TOBACCO and NORTHEAST UTILITIES
Assuming the 90 days trading horizon IMPERIAL TOBACCO is expected to generate 0.78 times more return on investment than NORTHEAST UTILITIES. However, IMPERIAL TOBACCO is 1.27 times less risky than NORTHEAST UTILITIES. It trades about 0.08 of its potential returns per unit of risk. NORTHEAST UTILITIES is currently generating about -0.02 per unit of risk. If you would invest 2,063 in IMPERIAL TOBACCO on October 13, 2024 and sell it today you would earn a total of 1,030 from holding IMPERIAL TOBACCO or generate 49.93% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
IMPERIAL TOBACCO vs. NORTHEAST UTILITIES
Performance |
| Timeline |
| IMPERIAL TOBACCO |
| NORTHEAST UTILITIES |
IMPERIAL TOBACCO and NORTHEAST UTILITIES Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IMPERIAL TOBACCO and NORTHEAST UTILITIES
The main advantage of trading using opposite IMPERIAL TOBACCO and NORTHEAST UTILITIES positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IMPERIAL TOBACCO position performs unexpectedly, NORTHEAST UTILITIES 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 NORTHEAST UTILITIES will offset losses from the drop in NORTHEAST UTILITIES's long position.| IMPERIAL TOBACCO vs. VARIOUS EATERIES LS | IMPERIAL TOBACCO vs. COMPUTERSHARE | IMPERIAL TOBACCO vs. Ribbon Communications | IMPERIAL TOBACCO vs. TELECOM ITALRISP ADR10 |
| NORTHEAST UTILITIES vs. Granite Construction | NORTHEAST UTILITIES vs. VIRGIN WINES UK | NORTHEAST UTILITIES vs. ALEFARM BREWING DK 05 | NORTHEAST UTILITIES vs. Hanison Construction Holdings |
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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.
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