Correlation Between National Grid and Avangrid
Can any of the company-specific risk be diversified away by investing in both National Grid and Avangrid 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 Avangrid 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 Avangrid, you can compare the effects of market volatilities on National Grid and Avangrid 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 Avangrid. Check out your portfolio center. Please also check ongoing floating volatility patterns of National Grid and Avangrid.
Diversification Opportunities for National Grid and Avangrid
-0.47 | Correlation Coefficient |
Very good diversification
The 3 months correlation between National and Avangrid is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding National Grid plc and Avangrid in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Avangrid 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 Avangrid. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Avangrid has no effect on the direction of National Grid i.e., National Grid and Avangrid go up and down completely randomly.
Pair Corralation between National Grid and Avangrid
Assuming the 90 days horizon National Grid plc is expected to under-perform the Avangrid. In addition to that, National Grid is 14.78 times more volatile than Avangrid. It trades about -0.07 of its total potential returns per unit of risk. Avangrid is currently generating about 0.09 per unit of volatility. If you would invest 3,528 in Avangrid on September 13, 2024 and sell it today you would earn a total of 33.50 from holding Avangrid or generate 0.95% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 97.67% |
| Values | Daily Returns |
National Grid plc vs. Avangrid
Performance |
| Timeline |
| National Grid plc |
| Avangrid |
National Grid and Avangrid Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with National Grid and Avangrid
The main advantage of trading using opposite National Grid and Avangrid positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if National Grid position performs unexpectedly, Avangrid 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 Avangrid will offset losses from the drop in Avangrid's long position.| National Grid vs. Consolidated Edison | National Grid vs. Entergy | National Grid vs. FirstEnergy | National Grid vs. PPL Corporation |
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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
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