Correlation Between NORTHEAST UTILITIES and VIRG NATL

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

By analyzing existing cross correlation between NORTHEAST UTILITIES and VIRG NATL BANKSH, you can compare the effects of market volatilities on NORTHEAST UTILITIES and VIRG NATL 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 NORTHEAST UTILITIES with a short position of VIRG NATL. Check out your portfolio center. Please also check ongoing floating volatility patterns of NORTHEAST UTILITIES and VIRG NATL.

Diversification Opportunities for NORTHEAST UTILITIES and VIRG NATL

-0.06

Correlation Coefficient

NORTHEAST UTILITIES  VIRG NATL

Good diversification

The 3 months correlation between NORTHEAST and VIRG is -0.06. Overlapping area represents the amount of risk that can be diversified away by holding NORTHEAST UTILITIES and VIRG NATL BANKSH in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VIRG NATL BANKSH and NORTHEAST UTILITIES 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 NORTHEAST UTILITIES are associated (or correlated) with VIRG NATL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VIRG NATL BANKSH has no effect on the direction of NORTHEAST UTILITIES i.e., NORTHEAST UTILITIES and VIRG NATL go up and down completely randomly.

Pair Corralation between NORTHEAST UTILITIES and VIRG NATL

Assuming the 90 days trading horizon NORTHEAST UTILITIES is expected to generate 0.38 times more return on investment than VIRG NATL. However, NORTHEAST UTILITIES is 2.6 times less risky than VIRG NATL. It trades about -0.15 of its potential returns per unit of risk. VIRG NATL BANKSH is currently generating about -0.18 per unit of risk. If you would invest  5,627  in NORTHEAST UTILITIES on October 8, 2024 and sell it today you would lose (177.00) from holding NORTHEAST UTILITIES or give up 3.15% of portfolio value over 90 days.

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

NORTHEAST UTILITIES  vs.  VIRG NATL BANKSH

NORTHEAST UTILITIES

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days NORTHEAST UTILITIES has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound forward-looking indicators, NORTHEAST UTILITIES is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

VIRG NATL BANKSH

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days VIRG NATL BANKSH has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, VIRG NATL is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with NORTHEAST UTILITIES and VIRG NATL

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

The idea behind NORTHEAST UTILITIES and VIRG NATL BANKSH 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.