Correlation Between Connecticut Light and Entergy Texas

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

Diversification Opportunities for Connecticut Light and Entergy Texas

0.12

Correlation Coefficient

Connecticut Light  Entergy Texas

Average diversification

The 3 months correlation between Connecticut and Entergy is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding The Connecticut Light and Entergy Texas in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Entergy Texas 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 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 Connecticut Light i.e., Connecticut Light and Entergy Texas go up and down completely randomly.

Pair Corralation between Connecticut Light and Entergy Texas

Assuming the 90 days horizon The Connecticut Light is expected to under-perform the Entergy Texas. In addition to that, Connecticut Light is 2.91 times more volatile than Entergy Texas. It trades about -0.1 of its total potential returns per unit of risk. Entergy Texas is currently generating about -0.03 per unit of volatility. If you would invest  2,396  in Entergy Texas on October 26, 2024 and sell it today you would lose (45.00) from holding Entergy Texas or give up 1.88% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.33%
Values	Daily Returns

The Connecticut Light  vs.  Entergy Texas

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. Even with unfluctuating performance in the last few months, the Stock's technical indicators remain relatively invariable which may send shares a bit higher in February 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Entergy Texas

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Entergy Texas has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Entergy Texas is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Connecticut Light and Entergy Texas

The main advantage of trading using opposite Connecticut Light and Entergy Texas positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Connecticut Light 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 The Connecticut Light 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.

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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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.