Correlation Between Connecticut Light and Gabelli Equity

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

Diversification Opportunities for Connecticut Light and Gabelli Equity

0.49

Correlation Coefficient

Connecticut Light  Gabelli Equity

Very weak diversification

The 3 months correlation between Connecticut and Gabelli is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding The Connecticut Light and The Gabelli Equity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gabelli Equity 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 Gabelli Equity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gabelli Equity has no effect on the direction of Connecticut Light i.e., Connecticut Light and Gabelli Equity go up and down completely randomly.

Pair Corralation between Connecticut Light and Gabelli Equity

Assuming the 90 days horizon The Connecticut Light is expected to generate 7.82 times more return on investment than Gabelli Equity. However, Connecticut Light is 7.82 times more volatile than The Gabelli Equity. It trades about 0.02 of its potential returns per unit of risk. The Gabelli Equity is currently generating about 0.02 per unit of risk. If you would invest  5,368  in The Connecticut Light on October 5, 2024 and sell it today you would lose (133.00) from holding The Connecticut Light or give up 2.48% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	78.14%
Values	Daily Returns

The Connecticut Light  vs.  The Gabelli Equity

Connecticut Light

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in The Connecticut Light are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak technical indicators, Connecticut Light reported solid returns over the last few months and may actually be approaching a breakup point.

Gabelli Equity

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days The Gabelli Equity has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Preferred Stock's fundamental drivers remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Connecticut Light and Gabelli Equity

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

The idea behind The Connecticut Light and The Gabelli Equity 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.