Correlation Between NORTHEAST UTILITIES and REMEDY ENTERTAINMENT

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

By analyzing existing cross correlation between NORTHEAST UTILITIES and REMEDY ENTERTAINMENT OYJ, you can compare the effects of market volatilities on NORTHEAST UTILITIES and REMEDY ENTERTAINMENT 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 REMEDY ENTERTAINMENT. Check out your portfolio center. Please also check ongoing floating volatility patterns of NORTHEAST UTILITIES and REMEDY ENTERTAINMENT.

Diversification Opportunities for NORTHEAST UTILITIES and REMEDY ENTERTAINMENT

0.57

Correlation Coefficient

NORTHEAST UTILITIES  REMEDY ENTERTAINMENT

Very weak diversification

The 3 months correlation between NORTHEAST and REMEDY is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding NORTHEAST UTILITIES and REMEDY ENTERTAINMENT OYJ in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on REMEDY ENTERTAINMENT OYJ 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 REMEDY ENTERTAINMENT. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of REMEDY ENTERTAINMENT OYJ has no effect on the direction of NORTHEAST UTILITIES i.e., NORTHEAST UTILITIES and REMEDY ENTERTAINMENT go up and down completely randomly.

Pair Corralation between NORTHEAST UTILITIES and REMEDY ENTERTAINMENT

Assuming the 90 days trading horizon NORTHEAST UTILITIES is expected to generate 0.56 times more return on investment than REMEDY ENTERTAINMENT. However, NORTHEAST UTILITIES is 1.79 times less risky than REMEDY ENTERTAINMENT. It trades about -0.02 of its potential returns per unit of risk. REMEDY ENTERTAINMENT OYJ is currently generating about -0.02 per unit of risk. If you would invest  6,692  in NORTHEAST UTILITIES on October 11, 2024 and sell it today you would lose (1,292) from holding NORTHEAST UTILITIES or give up 19.31% of portfolio value over 90 days.

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

NORTHEAST UTILITIES  vs.  REMEDY ENTERTAINMENT OYJ

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 latest uncertain performance, the Stock's forward-looking indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

REMEDY ENTERTAINMENT OYJ

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days REMEDY ENTERTAINMENT OYJ has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain 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 NORTHEAST UTILITIES and REMEDY ENTERTAINMENT

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

The idea behind NORTHEAST UTILITIES and REMEDY ENTERTAINMENT OYJ 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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.