Correlation Between National Grid and Consumers Energy
Can any of the company-specific risk be diversified away by investing in both National Grid and Consumers 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 National Grid and Consumers Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between National Grid PLC and Consumers Energy, you can compare the effects of market volatilities on National Grid and Consumers 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 National Grid with a short position of Consumers Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of National Grid and Consumers Energy.
Diversification Opportunities for National Grid and Consumers Energy
0.63 | Correlation Coefficient |
Poor diversification
The 3 months correlation between National and Consumers is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding National Grid PLC and Consumers Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Consumers Energy and National Grid 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 National Grid PLC are associated (or correlated) with Consumers Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Consumers Energy has no effect on the direction of National Grid i.e., National Grid and Consumers Energy go up and down completely randomly.
Pair Corralation between National Grid and Consumers Energy
Considering the 90-day investment horizon National Grid PLC is expected to generate 0.86 times more return on investment than Consumers Energy. However, National Grid PLC is 1.17 times less risky than Consumers Energy. It trades about 0.02 of its potential returns per unit of risk. Consumers Energy is currently generating about 0.0 per unit of risk. If you would invest 5,703 in National Grid PLC on December 23, 2024 and sell it today you would earn a total of 682.00 from holding National Grid PLC or generate 11.96% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
National Grid PLC vs. Consumers Energy
Performance |
| Timeline |
| National Grid PLC |
| Consumers Energy |
National Grid and Consumers Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with National Grid and Consumers Energy
The main advantage of trading using opposite National Grid and Consumers Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if National Grid position performs unexpectedly, Consumers 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 Consumers Energy will offset losses from the drop in Consumers Energy's long position.| National Grid vs. Southern Company | National Grid vs. Edison International | National Grid vs. American Electric Power | National Grid vs. Duke Energy |
| Consumers Energy vs. Nextera Energy | Consumers Energy vs. Duke Energy | Consumers Energy vs. PGE Corp | Consumers Energy vs. Southern Company |
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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.
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