Correlation Between NorthWestern and EDP Energias
Can any of the company-specific risk be diversified away by investing in both NorthWestern and EDP Energias 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 NorthWestern and EDP Energias into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NorthWestern and EDP Energias de, you can compare the effects of market volatilities on NorthWestern and EDP Energias 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 NorthWestern with a short position of EDP Energias. Check out your portfolio center. Please also check ongoing floating volatility patterns of NorthWestern and EDP Energias.
Diversification Opportunities for NorthWestern and EDP Energias
0.27 | Correlation Coefficient |
Modest diversification
The 3 months correlation between NorthWestern and EDP is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding NorthWestern and EDP Energias de in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EDP Energias de and NorthWestern 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 NorthWestern are associated (or correlated) with EDP Energias. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EDP Energias de has no effect on the direction of NorthWestern i.e., NorthWestern and EDP Energias go up and down completely randomly.
Pair Corralation between NorthWestern and EDP Energias
Considering the 90-day investment horizon NorthWestern is expected to generate 0.65 times more return on investment than EDP Energias. However, NorthWestern is 1.54 times less risky than EDP Energias. It trades about 0.11 of its potential returns per unit of risk. EDP Energias de is currently generating about -0.16 per unit of risk. If you would invest 5,346 in NorthWestern on September 1, 2024 and sell it today you would earn a total of 178.00 from holding NorthWestern or generate 3.33% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 95.45% |
| Values | Daily Returns |
NorthWestern vs. EDP Energias de
Performance |
| Timeline |
| NorthWestern |
| EDP Energias de |
NorthWestern and EDP Energias Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with NorthWestern and EDP Energias
The main advantage of trading using opposite NorthWestern and EDP Energias positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NorthWestern position performs unexpectedly, EDP Energias 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 EDP Energias will offset losses from the drop in EDP Energias' long position.| NorthWestern vs. Allete Inc | NorthWestern vs. Black Hills | NorthWestern vs. Otter Tail | NorthWestern vs. Avista |
| EDP Energias vs. RWE AG PK | EDP Energias vs. Iberdrola SA | EDP Energias vs. ENEL Societa per | EDP Energias vs. SSE PLC ADR |
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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.
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