Correlation Between Qwest Corp and Entergy Arkansas

Can any of the company-specific risk be diversified away by investing in both Qwest Corp and Entergy Arkansas 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 Qwest Corp and Entergy Arkansas into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Qwest Corp NT and Entergy Arkansas LLC, you can compare the effects of market volatilities on Qwest Corp and Entergy Arkansas 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 Qwest Corp with a short position of Entergy Arkansas. Check out your portfolio center. Please also check ongoing floating volatility patterns of Qwest Corp and Entergy Arkansas.

Diversification Opportunities for Qwest Corp and Entergy Arkansas

-0.74

Correlation Coefficient

Qwest Corp  Entergy Arkansas

Pay attention - limited upside

The 3 months correlation between Qwest and Entergy is -0.74. Overlapping area represents the amount of risk that can be diversified away by holding Qwest Corp NT and Entergy Arkansas LLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Entergy Arkansas LLC and Qwest Corp 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 Qwest Corp NT are associated (or correlated) with Entergy Arkansas. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Entergy Arkansas LLC has no effect on the direction of Qwest Corp i.e., Qwest Corp and Entergy Arkansas go up and down completely randomly.

Pair Corralation between Qwest Corp and Entergy Arkansas

Given the investment horizon of 90 days Qwest Corp NT is expected to generate 2.37 times more return on investment than Entergy Arkansas. However, Qwest Corp is 2.37 times more volatile than Entergy Arkansas LLC. It trades about 0.02 of its potential returns per unit of risk. Entergy Arkansas LLC is currently generating about -0.26 per unit of risk. If you would invest  1,719  in Qwest Corp NT on September 21, 2024 and sell it today you would earn a total of  9.00  from holding Qwest Corp NT or generate 0.52% return on investment over 90 days.

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

Qwest Corp NT  vs.  Entergy Arkansas LLC

Qwest Corp NT

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Qwest Corp NT are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unsteady fundamental drivers, Qwest Corp may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Entergy Arkansas LLC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Entergy Arkansas LLC has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the firm traders.

Pair Trading with Qwest Corp and Entergy Arkansas

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

The idea behind Qwest Corp NT and Entergy Arkansas LLC 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..