Correlation Between KINGBOARD CHEMICAL and NORTHEAST UTILITIES
Can any of the company-specific risk be diversified away by investing in both KINGBOARD CHEMICAL 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 KINGBOARD CHEMICAL and NORTHEAST UTILITIES into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between KINGBOARD CHEMICAL and NORTHEAST UTILITIES, you can compare the effects of market volatilities on KINGBOARD CHEMICAL 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 KINGBOARD CHEMICAL with a short position of NORTHEAST UTILITIES. Check out your portfolio center. Please also check ongoing floating volatility patterns of KINGBOARD CHEMICAL and NORTHEAST UTILITIES.
Diversification Opportunities for KINGBOARD CHEMICAL and NORTHEAST UTILITIES
-0.74 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between KINGBOARD and NORTHEAST is -0.74. Overlapping area represents the amount of risk that can be diversified away by holding KINGBOARD CHEMICAL and NORTHEAST UTILITIES in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NORTHEAST UTILITIES and KINGBOARD CHEMICAL 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 KINGBOARD CHEMICAL 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 KINGBOARD CHEMICAL i.e., KINGBOARD CHEMICAL and NORTHEAST UTILITIES go up and down completely randomly.
Pair Corralation between KINGBOARD CHEMICAL and NORTHEAST UTILITIES
Assuming the 90 days trading horizon KINGBOARD CHEMICAL is expected to generate 1.26 times more return on investment than NORTHEAST UTILITIES. However, KINGBOARD CHEMICAL is 1.26 times more volatile than NORTHEAST UTILITIES. It trades about 0.42 of its potential returns per unit of risk. NORTHEAST UTILITIES is currently generating about -0.05 per unit of risk. If you would invest 224.00 in KINGBOARD CHEMICAL on October 26, 2024 and sell it today you would earn a total of 38.00 from holding KINGBOARD CHEMICAL or generate 16.96% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
KINGBOARD CHEMICAL vs. NORTHEAST UTILITIES
Performance |
| Timeline |
| KINGBOARD CHEMICAL |
| NORTHEAST UTILITIES |
KINGBOARD CHEMICAL and NORTHEAST UTILITIES Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with KINGBOARD CHEMICAL and NORTHEAST UTILITIES
The main advantage of trading using opposite KINGBOARD CHEMICAL and NORTHEAST UTILITIES positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if KINGBOARD CHEMICAL 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.| KINGBOARD CHEMICAL vs. Verizon Communications | KINGBOARD CHEMICAL vs. SOUTHWEST AIRLINES | KINGBOARD CHEMICAL vs. Charter Communications | KINGBOARD CHEMICAL vs. TELECOM ITALIA |
| NORTHEAST UTILITIES vs. Apple Inc | NORTHEAST UTILITIES vs. Apple Inc | NORTHEAST UTILITIES vs. Apple Inc | NORTHEAST UTILITIES vs. Apple Inc |
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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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