Correlation Between SSE PLC and Otter Tail
Can any of the company-specific risk be diversified away by investing in both SSE PLC and Otter Tail 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 SSE PLC and Otter Tail into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between SSE PLC ADR and Otter Tail, you can compare the effects of market volatilities on SSE PLC and Otter Tail 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 SSE PLC with a short position of Otter Tail. Check out your portfolio center. Please also check ongoing floating volatility patterns of SSE PLC and Otter Tail.
Diversification Opportunities for SSE PLC and Otter Tail
-0.51 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between SSE and Otter is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding SSE PLC ADR and Otter Tail in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Otter Tail and SSE PLC 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 SSE PLC ADR are associated (or correlated) with Otter Tail. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Otter Tail has no effect on the direction of SSE PLC i.e., SSE PLC and Otter Tail go up and down completely randomly.
Pair Corralation between SSE PLC and Otter Tail
Assuming the 90 days horizon SSE PLC ADR is expected to under-perform the Otter Tail. In addition to that, SSE PLC is 1.0 times more volatile than Otter Tail. It trades about -0.17 of its total potential returns per unit of risk. Otter Tail is currently generating about -0.13 per unit of volatility. If you would invest 8,095 in Otter Tail on September 12, 2024 and sell it today you would lose (250.00) from holding Otter Tail or give up 3.09% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
SSE PLC ADR vs. Otter Tail
Performance |
| Timeline |
| SSE PLC ADR |
| Otter Tail |
SSE PLC and Otter Tail Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SSE PLC and Otter Tail
The main advantage of trading using opposite SSE PLC and Otter Tail positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SSE PLC position performs unexpectedly, Otter Tail 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 Otter Tail will offset losses from the drop in Otter Tail's long position.| SSE PLC vs. ENEL Societa per | SSE PLC vs. Allete Inc | SSE PLC vs. Companhia Energetica de | SSE PLC vs. The AES |
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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 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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