Correlation Between NORTHEAST UTILITIES and CITY OFFICE
Can any of the company-specific risk be diversified away by investing in both NORTHEAST UTILITIES and CITY OFFICE 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 NORTHEAST UTILITIES and CITY OFFICE into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NORTHEAST UTILITIES and CITY OFFICE REIT, you can compare the effects of market volatilities on NORTHEAST UTILITIES and CITY OFFICE 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 NORTHEAST UTILITIES with a short position of CITY OFFICE. Check out your portfolio center. Please also check ongoing floating volatility patterns of NORTHEAST UTILITIES and CITY OFFICE.
Diversification Opportunities for NORTHEAST UTILITIES and CITY OFFICE
0.47 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between NORTHEAST and CITY is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding NORTHEAST UTILITIES and CITY OFFICE REIT in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CITY OFFICE REIT and NORTHEAST UTILITIES 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 NORTHEAST UTILITIES are associated (or correlated) with CITY OFFICE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CITY OFFICE REIT has no effect on the direction of NORTHEAST UTILITIES i.e., NORTHEAST UTILITIES and CITY OFFICE go up and down completely randomly.
Pair Corralation between NORTHEAST UTILITIES and CITY OFFICE
Assuming the 90 days trading horizon NORTHEAST UTILITIES is expected to generate 0.44 times more return on investment than CITY OFFICE. However, NORTHEAST UTILITIES is 2.3 times less risky than CITY OFFICE. It trades about -0.01 of its potential returns per unit of risk. CITY OFFICE REIT is currently generating about -0.02 per unit of risk. If you would invest 7,010 in NORTHEAST UTILITIES on August 27, 2024 and sell it today you would lose (910.00) from holding NORTHEAST UTILITIES or give up 12.98% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
NORTHEAST UTILITIES vs. CITY OFFICE REIT
Performance |
| Timeline |
| NORTHEAST UTILITIES |
| CITY OFFICE REIT |
NORTHEAST UTILITIES and CITY OFFICE Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with NORTHEAST UTILITIES and CITY OFFICE
The main advantage of trading using opposite NORTHEAST UTILITIES and CITY OFFICE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NORTHEAST UTILITIES position performs unexpectedly, CITY OFFICE 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 CITY OFFICE will offset losses from the drop in CITY OFFICE's long position.| NORTHEAST UTILITIES vs. Comba Telecom Systems | NORTHEAST UTILITIES vs. MAVEN WIRELESS SWEDEN | NORTHEAST UTILITIES vs. Gamma Communications plc | NORTHEAST UTILITIES vs. DeVry Education Group |
| CITY OFFICE vs. Universal Display | CITY OFFICE vs. Citic Telecom International | CITY OFFICE vs. ANTA SPORTS PRODUCT | CITY OFFICE vs. VIAPLAY GROUP AB |
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 Transaction History module to view history of all your transactions and understand their impact on performance.
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