Correlation Between United States and Entergy Arkansas

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

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

Diversification Opportunities for United States and Entergy Arkansas

-0.26

Correlation Coefficient

United States  Entergy Arkansas

Very good diversification

The 3 months correlation between United and Entergy is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding United States Cellular 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 United States 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 United States Cellular 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 United States i.e., United States and Entergy Arkansas go up and down completely randomly.

Pair Corralation between United States and Entergy Arkansas

Considering the 90-day investment horizon United States Cellular is expected to generate 0.75 times more return on investment than Entergy Arkansas. However, United States Cellular is 1.34 times less risky than Entergy Arkansas. It trades about -0.14 of its potential returns per unit of risk. Entergy Arkansas LLC is currently generating about -0.2 per unit of risk. If you would invest  2,344  in United States Cellular on September 27, 2024 and sell it today you would lose (34.00) from holding United States Cellular or give up 1.45% of portfolio value over 90 days.

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

United States Cellular  vs.  Entergy Arkansas LLC

United States Cellular

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days United States Cellular has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, United States is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

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 fragile 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 United States and Entergy Arkansas

The main advantage of trading using opposite United States and Entergy Arkansas positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if United States 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 United States Cellular 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.