Correlation Between Tri-ContinentalPFD and Connecticut Light

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

By analyzing existing cross correlation between Tri Continental PFD and The Connecticut Light, you can compare the effects of market volatilities on Tri-ContinentalPFD and Connecticut Light 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 Tri-ContinentalPFD with a short position of Connecticut Light. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tri-ContinentalPFD and Connecticut Light.

Diversification Opportunities for Tri-ContinentalPFD and Connecticut Light

0.42

Correlation Coefficient

Tri-ContinentalPFD  Connecticut Light

Very weak diversification

The 3 months correlation between Tri-ContinentalPFD and Connecticut is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Tri Continental PFD and The Connecticut Light in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Connecticut Light and Tri-ContinentalPFD 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 Tri Continental PFD are associated (or correlated) with Connecticut Light. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Connecticut Light has no effect on the direction of Tri-ContinentalPFD i.e., Tri-ContinentalPFD and Connecticut Light go up and down completely randomly.

Pair Corralation between Tri-ContinentalPFD and Connecticut Light

Given the investment horizon of 90 days Tri-ContinentalPFD is expected to generate 4.77 times less return on investment than Connecticut Light. But when comparing it to its historical volatility, Tri Continental PFD is 5.74 times less risky than Connecticut Light. It trades about 0.03 of its potential returns per unit of risk. The Connecticut Light is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  5,308  in The Connecticut Light on October 5, 2024 and sell it today you would lose (73.00) from holding The Connecticut Light or give up 1.38% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	76.21%
Values	Daily Returns

Tri Continental PFD  vs.  The Connecticut Light

Tri Continental PFD

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Tri Continental PFD has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Tri-ContinentalPFD is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Connecticut Light

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in The Connecticut Light are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Even with relatively unfluctuating technical indicators, Connecticut Light reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Tri-ContinentalPFD and Connecticut Light

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

The idea behind Tri Continental PFD and The Connecticut Light 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.