Correlation Between NORTHEAST UTILITIES and SIERRA METALS

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

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

Diversification Opportunities for NORTHEAST UTILITIES and SIERRA METALS

-0.13

Correlation Coefficient

NORTHEAST UTILITIES  SIERRA METALS

Good diversification

The 3 months correlation between NORTHEAST and SIERRA is -0.13. Overlapping area represents the amount of risk that can be diversified away by holding NORTHEAST UTILITIES and SIERRA METALS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SIERRA METALS 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 SIERRA METALS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SIERRA METALS has no effect on the direction of NORTHEAST UTILITIES i.e., NORTHEAST UTILITIES and SIERRA METALS go up and down completely randomly.

Pair Corralation between NORTHEAST UTILITIES and SIERRA METALS

Assuming the 90 days trading horizon NORTHEAST UTILITIES is expected to generate 0.66 times more return on investment than SIERRA METALS. However, NORTHEAST UTILITIES is 1.53 times less risky than SIERRA METALS. It trades about 0.04 of its potential returns per unit of risk. SIERRA METALS is currently generating about -0.01 per unit of risk. If you would invest  5,436  in NORTHEAST UTILITIES on December 24, 2024 and sell it today you would earn a total of  164.00  from holding NORTHEAST UTILITIES or generate 3.02% return on investment over 90 days.

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

NORTHEAST UTILITIES  vs.  SIERRA METALS

NORTHEAST UTILITIES

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in NORTHEAST UTILITIES are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound forward-looking indicators, NORTHEAST UTILITIES is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

SIERRA METALS

Risk-Adjusted Performance

Very Weak

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

Pair Trading with NORTHEAST UTILITIES and SIERRA METALS

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

The idea behind NORTHEAST UTILITIES and SIERRA METALS 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 Valuation module to check real value of public entities based on technical and fundamental data.