Correlation Between NORTHEAST UTILITIES and AIR PRODCHEMICALS
Can any of the company-specific risk be diversified away by investing in both NORTHEAST UTILITIES and AIR PRODCHEMICALS 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 AIR PRODCHEMICALS into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NORTHEAST UTILITIES and AIR PRODCHEMICALS, you can compare the effects of market volatilities on NORTHEAST UTILITIES and AIR PRODCHEMICALS 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 AIR PRODCHEMICALS. Check out your portfolio center. Please also check ongoing floating volatility patterns of NORTHEAST UTILITIES and AIR PRODCHEMICALS.
Diversification Opportunities for NORTHEAST UTILITIES and AIR PRODCHEMICALS
0.52 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between NORTHEAST and AIR is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding NORTHEAST UTILITIES and AIR PRODCHEMICALS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AIR PRODCHEMICALS 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 AIR PRODCHEMICALS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AIR PRODCHEMICALS has no effect on the direction of NORTHEAST UTILITIES i.e., NORTHEAST UTILITIES and AIR PRODCHEMICALS go up and down completely randomly.
Pair Corralation between NORTHEAST UTILITIES and AIR PRODCHEMICALS
Assuming the 90 days trading horizon NORTHEAST UTILITIES is expected to under-perform the AIR PRODCHEMICALS. But the stock apears to be less risky and, when comparing its historical volatility, NORTHEAST UTILITIES is 1.14 times less risky than AIR PRODCHEMICALS. The stock trades about -0.02 of its potential returns per unit of risk. The AIR PRODCHEMICALS is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest 26,453 in AIR PRODCHEMICALS on October 14, 2024 and sell it today you would earn a total of 1,197 from holding AIR PRODCHEMICALS or generate 4.53% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
NORTHEAST UTILITIES vs. AIR PRODCHEMICALS
Performance |
| Timeline |
| NORTHEAST UTILITIES |
| AIR PRODCHEMICALS |
NORTHEAST UTILITIES and AIR PRODCHEMICALS Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with NORTHEAST UTILITIES and AIR PRODCHEMICALS
The main advantage of trading using opposite NORTHEAST UTILITIES and AIR PRODCHEMICALS positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NORTHEAST UTILITIES position performs unexpectedly, AIR PRODCHEMICALS 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 AIR PRODCHEMICALS will offset losses from the drop in AIR PRODCHEMICALS's long position.| NORTHEAST UTILITIES vs. Granite Construction | NORTHEAST UTILITIES vs. VIRGIN WINES UK | NORTHEAST UTILITIES vs. ALEFARM BREWING DK 05 | NORTHEAST UTILITIES vs. Hanison Construction Holdings |
| AIR PRODCHEMICALS vs. Focus Home Interactive | AIR PRODCHEMICALS vs. INVITATION HOMES DL | AIR PRODCHEMICALS vs. WESANA HEALTH HOLD | AIR PRODCHEMICALS vs. ADDUS HOMECARE |
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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.
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