Correlation Between NORTHEAST UTILITIES and EVN AG
Can any of the company-specific risk be diversified away by investing in both NORTHEAST UTILITIES and EVN AG 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 EVN AG into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NORTHEAST UTILITIES and EVN AG, you can compare the effects of market volatilities on NORTHEAST UTILITIES and EVN AG 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 EVN AG. Check out your portfolio center. Please also check ongoing floating volatility patterns of NORTHEAST UTILITIES and EVN AG.
Diversification Opportunities for NORTHEAST UTILITIES and EVN AG
0.84 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between NORTHEAST and EVN is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding NORTHEAST UTILITIES and EVN AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EVN AG 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 EVN AG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EVN AG has no effect on the direction of NORTHEAST UTILITIES i.e., NORTHEAST UTILITIES and EVN AG go up and down completely randomly.
Pair Corralation between NORTHEAST UTILITIES and EVN AG
Assuming the 90 days trading horizon NORTHEAST UTILITIES is expected to under-perform the EVN AG. But the stock apears to be less risky and, when comparing its historical volatility, NORTHEAST UTILITIES is 1.28 times less risky than EVN AG. The stock trades about -0.17 of its potential returns per unit of risk. The EVN AG is currently generating about -0.13 of returns per unit of risk over similar time horizon. If you would invest 2,485 in EVN AG on October 26, 2024 and sell it today you would lose (250.00) from holding EVN AG or give up 10.06% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 97.5% |
| Values | Daily Returns |
NORTHEAST UTILITIES vs. EVN AG
Performance |
| Timeline |
| NORTHEAST UTILITIES |
| EVN AG |
NORTHEAST UTILITIES and EVN AG Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with NORTHEAST UTILITIES and EVN AG
The main advantage of trading using opposite NORTHEAST UTILITIES and EVN AG positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NORTHEAST UTILITIES position performs unexpectedly, EVN AG 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 EVN AG will offset losses from the drop in EVN AG's long position.| NORTHEAST UTILITIES vs. Apple Inc | NORTHEAST UTILITIES vs. Apple Inc | NORTHEAST UTILITIES vs. Apple Inc | NORTHEAST UTILITIES vs. Apple Inc |
| EVN AG vs. Tsingtao Brewery | EVN AG vs. NORTHEAST UTILITIES | EVN AG vs. China Resources Beer | EVN AG vs. MOLSON RS BEVERAGE |
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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..
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