Correlation Between Niagara Mohawk and EDP Energias

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

By analyzing existing cross correlation between Niagara Mohawk Power and EDP Energias, you can compare the effects of market volatilities on Niagara Mohawk and EDP Energias 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 Niagara Mohawk with a short position of EDP Energias. Check out your portfolio center. Please also check ongoing floating volatility patterns of Niagara Mohawk and EDP Energias.

Diversification Opportunities for Niagara Mohawk and EDP Energias

-0.25

Correlation Coefficient

Niagara Mohawk  EDP Energias

Very good diversification

The 3 months correlation between Niagara and EDP is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding Niagara Mohawk Power and EDP Energias in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EDP Energias and Niagara Mohawk 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 Niagara Mohawk Power are associated (or correlated) with EDP Energias. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EDP Energias has no effect on the direction of Niagara Mohawk i.e., Niagara Mohawk and EDP Energias go up and down completely randomly.

Pair Corralation between Niagara Mohawk and EDP Energias

If you would invest  6,200  in Niagara Mohawk Power on September 1, 2024 and sell it today you would earn a total of  0.00  from holding Niagara Mohawk Power or generate 0.0% return on investment over 90 days.

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

Niagara Mohawk Power  vs.  EDP Energias

Niagara Mohawk Power

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Niagara Mohawk Power are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Niagara Mohawk may actually be approaching a critical reversion point that can send shares even higher in December 2024.

EDP Energias

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days EDP Energias has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators 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 Niagara Mohawk and EDP Energias

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

The idea behind Niagara Mohawk Power and EDP Energias 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.