Correlation Between Connecticut Light and Avangrid

Can any of the company-specific risk be diversified away by investing in both Connecticut Light and Avangrid 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 Avangrid 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 Avangrid, you can compare the effects of market volatilities on Connecticut Light and Avangrid 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 Avangrid. Check out your portfolio center. Please also check ongoing floating volatility patterns of Connecticut Light and Avangrid.

Diversification Opportunities for Connecticut Light and Avangrid

-0.48

Correlation Coefficient

Connecticut Light  Avangrid

Very good diversification

The 3 months correlation between Connecticut and Avangrid is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding The Connecticut Light and Avangrid in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Avangrid 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 Avangrid. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Avangrid has no effect on the direction of Connecticut Light i.e., Connecticut Light and Avangrid go up and down completely randomly.

Pair Corralation between Connecticut Light and Avangrid

Assuming the 90 days horizon The Connecticut Light is expected to under-perform the Avangrid. In addition to that, Connecticut Light is 4.47 times more volatile than Avangrid. It trades about -0.07 of its total potential returns per unit of risk. Avangrid is currently generating about 0.12 per unit of volatility. If you would invest  3,540  in Avangrid on September 13, 2024 and sell it today you would earn a total of  22.00  from holding Avangrid or generate 0.62% return on investment over 90 days.

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

The Connecticut Light  vs.  Avangrid

Connecticut Light

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days The Connecticut Light has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Connecticut Light is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Avangrid

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Avangrid are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable technical and fundamental indicators, Avangrid is not utilizing all of its potentials. The newest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Connecticut Light and Avangrid

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

The idea behind The Connecticut Light and Avangrid 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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.