Correlation Between Eversource Energy and New Fortress

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

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

Diversification Opportunities for Eversource Energy and New Fortress

-0.53

Correlation Coefficient

Eversource Energy  New Fortress

Excellent diversification

The 3 months correlation between Eversource and New is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding Eversource Energy and New Fortress Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on New Fortress Energy and Eversource 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 Eversource Energy are associated (or correlated) with New Fortress. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of New Fortress Energy has no effect on the direction of Eversource Energy i.e., Eversource Energy and New Fortress go up and down completely randomly.

Pair Corralation between Eversource Energy and New Fortress

Allowing for the 90-day total investment horizon Eversource Energy is expected to generate 0.75 times more return on investment than New Fortress. However, Eversource Energy is 1.34 times less risky than New Fortress. It trades about 0.2 of its potential returns per unit of risk. New Fortress Energy is currently generating about -0.14 per unit of risk. If you would invest  5,879  in Eversource Energy on February 12, 2024 and sell it today you would earn a total of  313.00  from holding Eversource Energy or generate 5.32% return on investment over 90 days.

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

Eversource Energy  vs.  New Fortress Energy

Eversource Energy

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Eversource Energy are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Eversource Energy unveiled solid returns over the last few months and may actually be approaching a breakup point.

New Fortress Energy

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days New Fortress Energy has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in June 2024. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Eversource Energy and New Fortress

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

The idea behind Eversource Energy and New Fortress Energy 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.