Correlation Between National Grid and Entergy
Can any of the company-specific risk be diversified away by investing in both National Grid and Entergy 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 Entergy 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 Entergy, you can compare the effects of market volatilities on National Grid and Entergy 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 Entergy. Check out your portfolio center. Please also check ongoing floating volatility patterns of National Grid and Entergy.
Diversification Opportunities for National Grid and Entergy
-0.72 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between National and Entergy is -0.72. Overlapping area represents the amount of risk that can be diversified away by holding National Grid PLC and Entergy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Entergy 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 Entergy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Entergy has no effect on the direction of National Grid i.e., National Grid and Entergy go up and down completely randomly.
Pair Corralation between National Grid and Entergy
Considering the 90-day investment horizon National Grid is expected to generate 2.94 times less return on investment than Entergy. In addition to that, National Grid is 1.19 times more volatile than Entergy. It trades about 0.13 of its total potential returns per unit of risk. Entergy is currently generating about 0.47 per unit of volatility. If you would invest 7,449 in Entergy on October 20, 2024 and sell it today you would earn a total of 750.00 from holding Entergy or generate 10.07% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
National Grid PLC vs. Entergy
Performance |
| Timeline |
| National Grid PLC |
| Entergy |
National Grid and Entergy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with National Grid and Entergy
The main advantage of trading using opposite National Grid and Entergy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if National Grid position performs unexpectedly, Entergy 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 Entergy will offset losses from the drop in Entergy's long position.| National Grid vs. Southern Company | National Grid vs. Edison International | National Grid vs. American Electric Power | National Grid vs. Duke Energy |
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 Global Correlations module to find global opportunities by holding instruments from different markets.
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