Correlation Between NORTHEAST UTILITIES and Element Solutions
Can any of the company-specific risk be diversified away by investing in both NORTHEAST UTILITIES and Element Solutions 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 Element Solutions into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NORTHEAST UTILITIES and Element Solutions, you can compare the effects of market volatilities on NORTHEAST UTILITIES and Element Solutions 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 Element Solutions. Check out your portfolio center. Please also check ongoing floating volatility patterns of NORTHEAST UTILITIES and Element Solutions.
Diversification Opportunities for NORTHEAST UTILITIES and Element Solutions
0.55 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between NORTHEAST and Element is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding NORTHEAST UTILITIES and Element Solutions in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Element Solutions 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 Element Solutions. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Element Solutions has no effect on the direction of NORTHEAST UTILITIES i.e., NORTHEAST UTILITIES and Element Solutions go up and down completely randomly.
Pair Corralation between NORTHEAST UTILITIES and Element Solutions
Assuming the 90 days trading horizon NORTHEAST UTILITIES is expected to generate 1.16 times more return on investment than Element Solutions. However, NORTHEAST UTILITIES is 1.16 times more volatile than Element Solutions. It trades about 0.11 of its potential returns per unit of risk. Element Solutions is currently generating about 0.01 per unit of risk. If you would invest 5,400 in NORTHEAST UTILITIES on November 7, 2024 and sell it today you would earn a total of 200.00 from holding NORTHEAST UTILITIES or generate 3.7% 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. Element Solutions
Performance |
| Timeline |
| NORTHEAST UTILITIES |
| Element Solutions |
NORTHEAST UTILITIES and Element Solutions Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with NORTHEAST UTILITIES and Element Solutions
The main advantage of trading using opposite NORTHEAST UTILITIES and Element Solutions positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NORTHEAST UTILITIES position performs unexpectedly, Element Solutions 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 Element Solutions will offset losses from the drop in Element Solutions' long position.| NORTHEAST UTILITIES vs. Apple Inc | NORTHEAST UTILITIES vs. Apple Inc | NORTHEAST UTILITIES vs. Apple Inc | NORTHEAST UTILITIES vs. Apple Inc |
| Element Solutions vs. Magic Software Enterprises | Element Solutions vs. NAGOYA RAILROAD | Element Solutions vs. Fukuyama Transporting Co | Element Solutions vs. Broadridge Financial Solutions |
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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.
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