Correlation Between Connecticut Light and FactSet Research

Can any of the company-specific risk be diversified away by investing in both Connecticut Light and FactSet Research 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 Connecticut Light and FactSet Research into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between The Connecticut Light and FactSet Research Systems, you can compare the effects of market volatilities on Connecticut Light and FactSet Research 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 Connecticut Light with a short position of FactSet Research. Check out your portfolio center. Please also check ongoing floating volatility patterns of Connecticut Light and FactSet Research.

Diversification Opportunities for Connecticut Light and FactSet Research

-0.7

Correlation Coefficient

Connecticut Light  FactSet Research

Excellent diversification

The 3 months correlation between Connecticut and FactSet is -0.7. Overlapping area represents the amount of risk that can be diversified away by holding The Connecticut Light and FactSet Research Systems in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FactSet Research Systems and Connecticut Light 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 The Connecticut Light are associated (or correlated) with FactSet Research. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FactSet Research Systems has no effect on the direction of Connecticut Light i.e., Connecticut Light and FactSet Research go up and down completely randomly.

Pair Corralation between Connecticut Light and FactSet Research

Assuming the 90 days horizon Connecticut Light is expected to generate 1.72 times less return on investment than FactSet Research. In addition to that, Connecticut Light is 2.75 times more volatile than FactSet Research Systems. It trades about 0.01 of its total potential returns per unit of risk. FactSet Research Systems is currently generating about 0.04 per unit of volatility. If you would invest  38,835  in FactSet Research Systems on September 15, 2024 and sell it today you would earn a total of  10,039  from holding FactSet Research Systems or generate 25.85% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	77.78%
Values	Daily Returns

The Connecticut Light  vs.  FactSet Research Systems

Connecticut Light

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days The Connecticut Light has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Connecticut Light is not utilizing all of its potentials. The newest stock price disarray, may contribute to short-term losses for the investors.

FactSet Research Systems

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in FactSet Research Systems are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak fundamental indicators, FactSet Research may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Connecticut Light and FactSet Research

The main advantage of trading using opposite Connecticut Light and FactSet Research positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Connecticut Light position performs unexpectedly, FactSet Research 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 FactSet Research will offset losses from the drop in FactSet Research's long position.

The idea behind The Connecticut Light and FactSet Research Systems 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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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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.