Correlation Between Connecticut Light and Emera Incorporated

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

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

Diversification Opportunities for Connecticut Light and Emera Incorporated

0.04

Correlation Coefficient

Connecticut Light  Emera Incorporated

Significant diversification

The 3 months correlation between Connecticut and Emera is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding The Connecticut Light and Emera Incorporated in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Emera Incorporated and Connecticut Light 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 The Connecticut Light are associated (or correlated) with Emera Incorporated. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Emera Incorporated has no effect on the direction of Connecticut Light i.e., Connecticut Light and Emera Incorporated go up and down completely randomly.

Pair Corralation between Connecticut Light and Emera Incorporated

Assuming the 90 days horizon Connecticut Light is expected to generate 1.82 times less return on investment than Emera Incorporated. In addition to that, Connecticut Light is 1.43 times more volatile than Emera Incorporated. It trades about 0.08 of its total potential returns per unit of risk. Emera Incorporated is currently generating about 0.21 per unit of volatility. If you would invest  1,560  in Emera Incorporated on February 26, 2024 and sell it today you would earn a total of  40.00  from holding Emera Incorporated or generate 2.56% return on investment over 90 days.

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

The Connecticut Light  vs.  Emera Incorporated

Connecticut Light

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in The Connecticut Light are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy technical indicators, Connecticut Light is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Emera Incorporated

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Emera Incorporated are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Emera Incorporated is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Connecticut Light and Emera Incorporated

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

The idea behind The Connecticut Light and Emera Incorporated 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.

Check out your portfolio center.

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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..