Correlation Between NORTHEAST UTILITIES and Chesapeake Utilities
Can any of the company-specific risk be diversified away by investing in both NORTHEAST UTILITIES and Chesapeake Utilities 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 Chesapeake Utilities into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NORTHEAST UTILITIES and Chesapeake Utilities, you can compare the effects of market volatilities on NORTHEAST UTILITIES and Chesapeake Utilities 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 Chesapeake Utilities. Check out your portfolio center. Please also check ongoing floating volatility patterns of NORTHEAST UTILITIES and Chesapeake Utilities.
Diversification Opportunities for NORTHEAST UTILITIES and Chesapeake Utilities
-0.23 | Correlation Coefficient |
Very good diversification
The 3 months correlation between NORTHEAST and Chesapeake is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding NORTHEAST UTILITIES and Chesapeake Utilities in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chesapeake Utilities 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 Chesapeake Utilities. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chesapeake Utilities has no effect on the direction of NORTHEAST UTILITIES i.e., NORTHEAST UTILITIES and Chesapeake Utilities go up and down completely randomly.
Pair Corralation between NORTHEAST UTILITIES and Chesapeake Utilities
Assuming the 90 days trading horizon NORTHEAST UTILITIES is expected to under-perform the Chesapeake Utilities. But the stock apears to be less risky and, when comparing its historical volatility, NORTHEAST UTILITIES is 1.01 times less risky than Chesapeake Utilities. The stock trades about -0.01 of its potential returns per unit of risk. The Chesapeake Utilities is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest 11,253 in Chesapeake Utilities on August 27, 2024 and sell it today you would earn a total of 1,347 from holding Chesapeake Utilities or generate 11.97% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
NORTHEAST UTILITIES vs. Chesapeake Utilities
Performance |
| Timeline |
| NORTHEAST UTILITIES |
| Chesapeake Utilities |
NORTHEAST UTILITIES and Chesapeake Utilities Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with NORTHEAST UTILITIES and Chesapeake Utilities
The main advantage of trading using opposite NORTHEAST UTILITIES and Chesapeake Utilities positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NORTHEAST UTILITIES position performs unexpectedly, Chesapeake Utilities 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 Chesapeake Utilities will offset losses from the drop in Chesapeake Utilities' 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 |
| Chesapeake Utilities vs. Pure Storage | Chesapeake Utilities vs. Datadog | Chesapeake Utilities vs. Titan Machinery | Chesapeake Utilities vs. DOCDATA |
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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.
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