Correlation Between Connecticut Light and PacifiCorp

Can any of the company-specific risk be diversified away by investing in both Connecticut Light and PacifiCorp 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 PacifiCorp 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 PacifiCorp, you can compare the effects of market volatilities on Connecticut Light and PacifiCorp 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 PacifiCorp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Connecticut Light and PacifiCorp.

Diversification Opportunities for Connecticut Light and PacifiCorp

-0.47

Correlation Coefficient

Connecticut Light  PacifiCorp

Very good diversification

The 3 months correlation between Connecticut and PacifiCorp is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding The Connecticut Light and PacifiCorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PacifiCorp 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 PacifiCorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PacifiCorp has no effect on the direction of Connecticut Light i.e., Connecticut Light and PacifiCorp go up and down completely randomly.

Pair Corralation between Connecticut Light and PacifiCorp

Assuming the 90 days horizon Connecticut Light is expected to generate 31.57 times less return on investment than PacifiCorp. But when comparing it to its historical volatility, The Connecticut Light is 1.76 times less risky than PacifiCorp. It trades about 0.0 of its potential returns per unit of risk. PacifiCorp is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  15,180  in PacifiCorp on October 26, 2024 and sell it today you would earn a total of  3,045  from holding PacifiCorp or generate 20.06% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	96.2%
Values	Daily Returns

The Connecticut Light  vs.  PacifiCorp

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 technical indicators, Connecticut Light is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

PacifiCorp

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in PacifiCorp are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating essential indicators, PacifiCorp displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Connecticut Light and PacifiCorp

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

The idea behind The Connecticut Light and PacifiCorp 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 Stocks Directory module to find actively traded stocks across global markets.