Correlation Between Connecticut Light and Sphere Entertainment

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

Diversification Opportunities for Connecticut Light and Sphere Entertainment

0.21

Correlation Coefficient

Connecticut Light  Sphere Entertainment

Modest diversification

The 3 months correlation between Connecticut and Sphere is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding The Connecticut Light and Sphere Entertainment Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sphere Entertainment 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 Sphere Entertainment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sphere Entertainment has no effect on the direction of Connecticut Light i.e., Connecticut Light and Sphere Entertainment go up and down completely randomly.

Pair Corralation between Connecticut Light and Sphere Entertainment

Assuming the 90 days horizon The Connecticut Light is expected to generate 0.43 times more return on investment than Sphere Entertainment. However, The Connecticut Light is 2.34 times less risky than Sphere Entertainment. It trades about 0.38 of its potential returns per unit of risk. Sphere Entertainment Co is currently generating about -0.1 per unit of risk. If you would invest  4,049  in The Connecticut Light on June 30, 2024 and sell it today you would earn a total of  461.00  from holding The Connecticut Light or generate 11.39% return on investment over 90 days.

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

The Connecticut Light  vs.  Sphere Entertainment Co

Connecticut Light

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in The Connecticut Light are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of very weak technical indicators, Connecticut Light displayed solid returns over the last few months and may actually be approaching a breakup point.

Sphere Entertainment

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Sphere Entertainment Co are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Even with relatively unsteady technical indicators, Sphere Entertainment reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Connecticut Light and Sphere Entertainment

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

The idea behind The Connecticut Light and Sphere Entertainment Co 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.