Correlation Between FactSet Research and ENTERGY

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

By analyzing existing cross correlation between FactSet Research Systems and ENTERGY TEX INC, you can compare the effects of market volatilities on FactSet Research and ENTERGY 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 FactSet Research with a short position of ENTERGY. Check out your portfolio center. Please also check ongoing floating volatility patterns of FactSet Research and ENTERGY.

Diversification Opportunities for FactSet Research and ENTERGY

-0.55

Correlation Coefficient

FactSet Research  ENTERGY

Excellent diversification

The 3 months correlation between FactSet and ENTERGY is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding FactSet Research Systems and ENTERGY TEX INC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ENTERGY TEX INC and FactSet Research 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 FactSet Research Systems are associated (or correlated) with ENTERGY. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ENTERGY TEX INC has no effect on the direction of FactSet Research i.e., FactSet Research and ENTERGY go up and down completely randomly.

Pair Corralation between FactSet Research and ENTERGY

Considering the 90-day investment horizon FactSet Research Systems is expected to generate 2.39 times more return on investment than ENTERGY. However, FactSet Research is 2.39 times more volatile than ENTERGY TEX INC. It trades about 0.19 of its potential returns per unit of risk. ENTERGY TEX INC is currently generating about -0.07 per unit of risk. If you would invest  42,574  in FactSet Research Systems on September 2, 2024 and sell it today you would earn a total of  6,493  from holding FactSet Research Systems or generate 15.25% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	89.06%
Values	Daily Returns

FactSet Research Systems  vs.  ENTERGY TEX INC

FactSet Research Systems

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in FactSet Research Systems are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak fundamental indicators, FactSet Research unveiled solid returns over the last few months and may actually be approaching a breakup point.

ENTERGY TEX INC

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with FactSet Research and ENTERGY

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

The idea behind FactSet Research Systems and ENTERGY TEX INC 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.