Correlation Between Entergy New and Reinsurance Group

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

By analyzing existing cross correlation between Entergy New Orleans and Reinsurance Group of, you can compare the effects of market volatilities on Entergy New and Reinsurance Group 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 New with a short position of Reinsurance Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of Entergy New and Reinsurance Group.

Diversification Opportunities for Entergy New and Reinsurance Group

0.14

Correlation Coefficient

Entergy New  Reinsurance Group

Average diversification

The 3 months correlation between Entergy and Reinsurance is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding Entergy New Orleans and Reinsurance Group of in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Reinsurance Group and Entergy New 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 New Orleans are associated (or correlated) with Reinsurance Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Reinsurance Group has no effect on the direction of Entergy New i.e., Entergy New and Reinsurance Group go up and down completely randomly.

Pair Corralation between Entergy New and Reinsurance Group

Considering the 90-day investment horizon Entergy New Orleans is expected to under-perform the Reinsurance Group. In addition to that, Entergy New is 2.17 times more volatile than Reinsurance Group of. It trades about -0.02 of its total potential returns per unit of risk. Reinsurance Group of is currently generating about -0.01 per unit of volatility. If you would invest  2,502  in Reinsurance Group of on November 29, 2024 and sell it today you would lose (4.00) from holding Reinsurance Group of or give up 0.16% of portfolio value over 90 days.

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

Entergy New Orleans  vs.  Reinsurance Group of

Entergy New Orleans

Risk-Adjusted Performance

Very Weak

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

Reinsurance Group

Risk-Adjusted Performance

Very Weak

Over the last 90 days Reinsurance Group of has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Reinsurance Group is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Entergy New and Reinsurance Group

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

The idea behind Entergy New Orleans and Reinsurance Group of 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.