Correlation Between Entergy Arkansas and Qwest Corp

Can any of the company-specific risk be diversified away by investing in both Entergy Arkansas and Qwest Corp 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 Entergy Arkansas and Qwest Corp into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Entergy Arkansas LLC and Qwest Corp NT, you can compare the effects of market volatilities on Entergy Arkansas and Qwest Corp 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 Entergy Arkansas with a short position of Qwest Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Entergy Arkansas and Qwest Corp.

Diversification Opportunities for Entergy Arkansas and Qwest Corp

-0.39

Correlation Coefficient

Entergy Arkansas  Qwest Corp

Very good diversification

The 3 months correlation between Entergy and Qwest is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding Entergy Arkansas LLC and Qwest Corp NT in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Qwest Corp NT and Entergy Arkansas 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 Entergy Arkansas LLC are associated (or correlated) with Qwest Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Qwest Corp NT has no effect on the direction of Entergy Arkansas i.e., Entergy Arkansas and Qwest Corp go up and down completely randomly.

Pair Corralation between Entergy Arkansas and Qwest Corp

Considering the 90-day investment horizon Entergy Arkansas LLC is expected to under-perform the Qwest Corp. But the stock apears to be less risky and, when comparing its historical volatility, Entergy Arkansas LLC is 3.12 times less risky than Qwest Corp. The stock trades about -0.02 of its potential returns per unit of risk. The Qwest Corp NT is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  1,505  in Qwest Corp NT on September 5, 2024 and sell it today you would earn a total of  297.00  from holding Qwest Corp NT or generate 19.73% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Entergy Arkansas LLC  vs.  Qwest Corp NT

Entergy Arkansas LLC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Entergy Arkansas LLC has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong basic indicators, Entergy Arkansas is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.

Qwest Corp NT

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Qwest Corp NT are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unsteady fundamental drivers, Qwest Corp sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Entergy Arkansas and Qwest Corp

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

The idea behind Entergy Arkansas LLC and Qwest Corp NT 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.