Correlation Between NORTHEAST UTILITIES and CARSALESCOM
Can any of the company-specific risk be diversified away by investing in both NORTHEAST UTILITIES and CARSALESCOM 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 CARSALESCOM into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NORTHEAST UTILITIES and CARSALESCOM, you can compare the effects of market volatilities on NORTHEAST UTILITIES and CARSALESCOM 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 CARSALESCOM. Check out your portfolio center. Please also check ongoing floating volatility patterns of NORTHEAST UTILITIES and CARSALESCOM.
Diversification Opportunities for NORTHEAST UTILITIES and CARSALESCOM
0.08 | Correlation Coefficient |
Significant diversification
The 3 months correlation between NORTHEAST and CARSALESCOM is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding NORTHEAST UTILITIES and CARSALESCOM in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CARSALESCOM 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 CARSALESCOM. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CARSALESCOM has no effect on the direction of NORTHEAST UTILITIES i.e., NORTHEAST UTILITIES and CARSALESCOM go up and down completely randomly.
Pair Corralation between NORTHEAST UTILITIES and CARSALESCOM
Assuming the 90 days trading horizon NORTHEAST UTILITIES is expected to under-perform the CARSALESCOM. But the stock apears to be less risky and, when comparing its historical volatility, NORTHEAST UTILITIES is 1.16 times less risky than CARSALESCOM. The stock trades about -0.11 of its potential returns per unit of risk. The CARSALESCOM is currently generating about -0.05 of returns per unit of risk over similar time horizon. If you would invest 2,300 in CARSALESCOM on September 29, 2024 and sell it today you would lose (120.00) from holding CARSALESCOM or give up 5.22% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
NORTHEAST UTILITIES vs. CARSALESCOM
Performance |
| Timeline |
| NORTHEAST UTILITIES |
| CARSALESCOM |
NORTHEAST UTILITIES and CARSALESCOM Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with NORTHEAST UTILITIES and CARSALESCOM
The main advantage of trading using opposite NORTHEAST UTILITIES and CARSALESCOM positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NORTHEAST UTILITIES position performs unexpectedly, CARSALESCOM 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 CARSALESCOM will offset losses from the drop in CARSALESCOM's long position.| NORTHEAST UTILITIES vs. OAKTRSPECLENDNEW | NORTHEAST UTILITIES vs. BANKINTER ADR 2007 | NORTHEAST UTILITIES vs. National Bank Holdings | NORTHEAST UTILITIES vs. TFS FINANCIAL |
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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
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