Correlation Between Consumers Energy and NewJersey Resources

Can any of the company-specific risk be diversified away by investing in both Consumers Energy and NewJersey Resources 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 Consumers Energy and NewJersey Resources into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Consumers Energy and NewJersey Resources, you can compare the effects of market volatilities on Consumers Energy and NewJersey Resources 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 Consumers Energy with a short position of NewJersey Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of Consumers Energy and NewJersey Resources.

Diversification Opportunities for Consumers Energy and NewJersey Resources

-0.47

Correlation Coefficient

Consumers Energy  NewJersey Resources

Very good diversification

The 3 months correlation between Consumers and NewJersey is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding Consumers Energy and NewJersey Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NewJersey Resources and Consumers Energy 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 Consumers Energy are associated (or correlated) with NewJersey Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NewJersey Resources has no effect on the direction of Consumers Energy i.e., Consumers Energy and NewJersey Resources go up and down completely randomly.

Pair Corralation between Consumers Energy and NewJersey Resources

Assuming the 90 days trading horizon Consumers Energy is expected to under-perform the NewJersey Resources. In addition to that, Consumers Energy is 1.22 times more volatile than NewJersey Resources. It trades about -0.01 of its total potential returns per unit of risk. NewJersey Resources is currently generating about 0.05 per unit of volatility. If you would invest  3,904  in NewJersey Resources on September 28, 2024 and sell it today you would earn a total of  727.00  from holding NewJersey Resources or generate 18.62% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	99.7%
Values	Daily Returns

Consumers Energy  vs.  NewJersey Resources

Consumers Energy

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Consumers Energy has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Preferred Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

NewJersey Resources

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Consumers Energy and NewJersey Resources

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

The idea behind Consumers Energy and NewJersey Resources 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.