Correlation Between Spire and Entergy Texas
Can any of the company-specific risk be diversified away by investing in both Spire and Entergy Texas 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 Spire and Entergy Texas into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Spire Inc and Entergy Texas, you can compare the effects of market volatilities on Spire and Entergy Texas 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 Spire with a short position of Entergy Texas. Check out your portfolio center. Please also check ongoing floating volatility patterns of Spire and Entergy Texas.
Diversification Opportunities for Spire and Entergy Texas
0.79 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Spire and Entergy is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Spire Inc and Entergy Texas in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Entergy Texas and Spire 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 Spire Inc are associated (or correlated) with Entergy Texas. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Entergy Texas has no effect on the direction of Spire i.e., Spire and Entergy Texas go up and down completely randomly.
Pair Corralation between Spire and Entergy Texas
Assuming the 90 days horizon Spire is expected to generate 7.75 times less return on investment than Entergy Texas. But when comparing it to its historical volatility, Spire Inc is 1.31 times less risky than Entergy Texas. It trades about 0.02 of its potential returns per unit of risk. Entergy Texas is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest 2,430 in Entergy Texas on August 28, 2024 and sell it today you would earn a total of 43.00 from holding Entergy Texas or generate 1.77% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Spire Inc vs. Entergy Texas
Performance |
| Timeline |
| Spire Inc |
| Entergy Texas |
Spire and Entergy Texas Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Spire and Entergy Texas
The main advantage of trading using opposite Spire and Entergy Texas positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Spire position performs unexpectedly, Entergy Texas 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 Entergy Texas will offset losses from the drop in Entergy Texas' long position.The idea behind Spire Inc and Entergy Texas 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.| Entergy Texas vs. Duke Energy | Entergy Texas vs. Spire Inc | Entergy Texas vs. CMS Energy | Entergy Texas vs. Aquagold International |
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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.
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