Correlation Between NORTHEAST UTILITIES and INTER CARS
Can any of the company-specific risk be diversified away by investing in both NORTHEAST UTILITIES and INTER CARS 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 INTER CARS into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NORTHEAST UTILITIES and INTER CARS SA, you can compare the effects of market volatilities on NORTHEAST UTILITIES and INTER CARS 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 INTER CARS. Check out your portfolio center. Please also check ongoing floating volatility patterns of NORTHEAST UTILITIES and INTER CARS.
Diversification Opportunities for NORTHEAST UTILITIES and INTER CARS
-0.62 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between NORTHEAST and INTER is -0.62. Overlapping area represents the amount of risk that can be diversified away by holding NORTHEAST UTILITIES and INTER CARS SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on INTER CARS SA 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 INTER CARS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of INTER CARS SA has no effect on the direction of NORTHEAST UTILITIES i.e., NORTHEAST UTILITIES and INTER CARS go up and down completely randomly.
Pair Corralation between NORTHEAST UTILITIES and INTER CARS
Assuming the 90 days trading horizon NORTHEAST UTILITIES is expected to generate 3.57 times less return on investment than INTER CARS. But when comparing it to its historical volatility, NORTHEAST UTILITIES is 1.22 times less risky than INTER CARS. It trades about 0.11 of its potential returns per unit of risk. INTER CARS SA is currently generating about 0.31 of returns per unit of risk over similar time horizon. If you would invest 11,860 in INTER CARS SA on November 7, 2024 and sell it today you would earn a total of 1,480 from holding INTER CARS SA or generate 12.48% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 86.96% |
| Values | Daily Returns |
NORTHEAST UTILITIES vs. INTER CARS SA
Performance |
| Timeline |
| NORTHEAST UTILITIES |
| INTER CARS SA |
NORTHEAST UTILITIES and INTER CARS Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with NORTHEAST UTILITIES and INTER CARS
The main advantage of trading using opposite NORTHEAST UTILITIES and INTER CARS positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NORTHEAST UTILITIES position performs unexpectedly, INTER CARS 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 INTER CARS will offset losses from the drop in INTER CARS's long position.| NORTHEAST UTILITIES vs. CORNISH METALS INC | NORTHEAST UTILITIES vs. MCEWEN MINING INC | NORTHEAST UTILITIES vs. Monster Beverage Corp | NORTHEAST UTILITIES vs. SAN MIGUEL BREWERY |
| INTER CARS vs. Allegheny Technologies Incorporated | INTER CARS vs. HEALTHSTREAM | INTER CARS vs. WESANA HEALTH HOLD | INTER CARS vs. NIGHTINGALE HEALTH EO |
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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