Correlation Between SoundHound and NSTAR

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Can any of the company-specific risk be diversified away by investing in both SoundHound and NSTAR 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 SoundHound and NSTAR into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between SoundHound AI and NSTAR Electric Co, you can compare the effects of market volatilities on SoundHound and NSTAR 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 SoundHound with a short position of NSTAR. Check out your portfolio center. Please also check ongoing floating volatility patterns of SoundHound and NSTAR.

Diversification Opportunities for SoundHound and NSTAR

-0.56
  Correlation Coefficient

Excellent diversification

The 3 months correlation between SoundHound and NSTAR is -0.56. Overlapping area represents the amount of risk that can be diversified away by holding SoundHound AI and NSTAR Electric Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NSTAR Electric and SoundHound 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 SoundHound AI are associated (or correlated) with NSTAR. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NSTAR Electric has no effect on the direction of SoundHound i.e., SoundHound and NSTAR go up and down completely randomly.

Pair Corralation between SoundHound and NSTAR

Given the investment horizon of 90 days SoundHound AI is expected to generate 15.71 times more return on investment than NSTAR. However, SoundHound is 15.71 times more volatile than NSTAR Electric Co. It trades about 0.09 of its potential returns per unit of risk. NSTAR Electric Co is currently generating about -0.01 per unit of risk. If you would invest  317.00  in SoundHound AI on September 12, 2024 and sell it today you would earn a total of  1,106  from holding SoundHound AI or generate 348.9% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthVery Weak
Accuracy75.28%
ValuesDaily Returns

SoundHound AI  vs.  NSTAR Electric Co

 Performance 
       Timeline  
SoundHound AI 

Risk-Adjusted Performance

20 of 100

 
Weak
 
Strong
Solid
Compared to the overall equity markets, risk-adjusted returns on investments in SoundHound AI are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. In spite of very abnormal basic indicators, SoundHound displayed solid returns over the last few months and may actually be approaching a breakup point.
NSTAR Electric 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days NSTAR Electric Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Bond's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for NSTAR Electric Co investors.

SoundHound and NSTAR Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with SoundHound and NSTAR

The main advantage of trading using opposite SoundHound and NSTAR positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SoundHound position performs unexpectedly, NSTAR 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 NSTAR will offset losses from the drop in NSTAR's long position.
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The idea behind SoundHound AI and NSTAR Electric Co pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
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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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.

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