Correlation Between UNION and CenterPoint Energy
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By analyzing existing cross correlation between UNION ELEC 4 and CenterPoint Energy, you can compare the effects of market volatilities on UNION and CenterPoint Energy 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 UNION with a short position of CenterPoint Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of UNION and CenterPoint Energy.
Diversification Opportunities for UNION and CenterPoint Energy
0.12 | Correlation Coefficient |
Average diversification
The 3 months correlation between UNION and CenterPoint is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding UNION ELEC 4 and CenterPoint Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CenterPoint Energy and UNION 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 UNION ELEC 4 are associated (or correlated) with CenterPoint Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CenterPoint Energy has no effect on the direction of UNION i.e., UNION and CenterPoint Energy go up and down completely randomly.
Pair Corralation between UNION and CenterPoint Energy
Assuming the 90 days trading horizon UNION ELEC 4 is expected to generate 0.82 times more return on investment than CenterPoint Energy. However, UNION ELEC 4 is 1.21 times less risky than CenterPoint Energy. It trades about 0.41 of its potential returns per unit of risk. CenterPoint Energy is currently generating about 0.22 per unit of risk. If you would invest 7,979 in UNION ELEC 4 on September 12, 2024 and sell it today you would earn a total of 293.00 from holding UNION ELEC 4 or generate 3.67% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 45.45% |
| Values | Daily Returns |
UNION ELEC 4 vs. CenterPoint Energy
Performance |
| Timeline |
| UNION ELEC 4 |
| CenterPoint Energy |
UNION and CenterPoint Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with UNION and CenterPoint Energy
The main advantage of trading using opposite UNION and CenterPoint Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if UNION position performs unexpectedly, CenterPoint Energy 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 CenterPoint Energy will offset losses from the drop in CenterPoint Energy's long position.The idea behind UNION ELEC 4 and CenterPoint Energy 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.| CenterPoint Energy vs. Southern Company | CenterPoint Energy vs. Consolidated Edison | CenterPoint Energy vs. Edison 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.
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