Correlation Between Eversource Energy and SCE Trust

Can any of the company-specific risk be diversified away by investing in both Eversource Energy and SCE Trust 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 Eversource Energy and SCE Trust into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Eversource Energy and SCE Trust VI, you can compare the effects of market volatilities on Eversource Energy and SCE Trust 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 Eversource Energy with a short position of SCE Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of Eversource Energy and SCE Trust.

Diversification Opportunities for Eversource Energy and SCE Trust

0.17

Correlation Coefficient

Eversource Energy  SCE Trust

Average diversification

The 3 months correlation between Eversource and SCE is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding Eversource Energy and SCE Trust VI in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SCE Trust VI and Eversource Energy 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 Eversource Energy are associated (or correlated) with SCE Trust. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SCE Trust VI has no effect on the direction of Eversource Energy i.e., Eversource Energy and SCE Trust go up and down completely randomly.

Pair Corralation between Eversource Energy and SCE Trust

Allowing for the 90-day total investment horizon Eversource Energy is expected to generate 1.09 times more return on investment than SCE Trust. However, Eversource Energy is 1.09 times more volatile than SCE Trust VI. It trades about 0.01 of its potential returns per unit of risk. SCE Trust VI is currently generating about -0.13 per unit of risk. If you would invest  6,289  in Eversource Energy on December 1, 2024 and sell it today you would earn a total of  12.00  from holding Eversource Energy or generate 0.19% return on investment over 90 days.

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

Eversource Energy  vs.  SCE Trust VI

Eversource Energy

Risk-Adjusted Performance

Very Weak

Over the last 90 days Eversource Energy has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Eversource Energy is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

SCE Trust VI

Risk-Adjusted Performance

Very Weak

Over the last 90 days SCE Trust VI has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unsteady performance, the Preferred Stock's technical and fundamental indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Pair Trading with Eversource Energy and SCE Trust

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

The idea behind Eversource Energy and SCE Trust VI 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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.