Correlation Between NORTHEAST UTILITIES and NEL ASA
Can any of the company-specific risk be diversified away by investing in both NORTHEAST UTILITIES and NEL ASA 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 NEL ASA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NORTHEAST UTILITIES and NEL ASA ADR30, you can compare the effects of market volatilities on NORTHEAST UTILITIES and NEL ASA 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 NEL ASA. Check out your portfolio center. Please also check ongoing floating volatility patterns of NORTHEAST UTILITIES and NEL ASA.
Diversification Opportunities for NORTHEAST UTILITIES and NEL ASA
0.49 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between NORTHEAST and NEL is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding NORTHEAST UTILITIES and NEL ASA ADR30 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NEL ASA ADR30 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 NEL ASA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NEL ASA ADR30 has no effect on the direction of NORTHEAST UTILITIES i.e., NORTHEAST UTILITIES and NEL ASA go up and down completely randomly.
Pair Corralation between NORTHEAST UTILITIES and NEL ASA
Assuming the 90 days trading horizon NORTHEAST UTILITIES is expected to generate 0.26 times more return on investment than NEL ASA. However, NORTHEAST UTILITIES is 3.83 times less risky than NEL ASA. It trades about -0.02 of its potential returns per unit of risk. NEL ASA ADR30 is currently generating about -0.1 per unit of risk. If you would invest 5,600 in NORTHEAST UTILITIES on November 3, 2024 and sell it today you would lose (50.00) from holding NORTHEAST UTILITIES or give up 0.89% 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. NEL ASA ADR30
Performance |
| Timeline |
| NORTHEAST UTILITIES |
| NEL ASA ADR30 |
NORTHEAST UTILITIES and NEL ASA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with NORTHEAST UTILITIES and NEL ASA
The main advantage of trading using opposite NORTHEAST UTILITIES and NEL ASA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NORTHEAST UTILITIES position performs unexpectedly, NEL ASA 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 NEL ASA will offset losses from the drop in NEL ASA's long position.| NORTHEAST UTILITIES vs. Apple Inc | NORTHEAST UTILITIES vs. Apple Inc | NORTHEAST UTILITIES vs. Apple Inc | NORTHEAST UTILITIES vs. Apple Inc |
| NEL ASA vs. Siemens Aktiengesellschaft | NEL ASA vs. Vestas Wind Systems | NEL ASA vs. Superior Plus Corp | NEL ASA vs. Origin Agritech |
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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.
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