Correlation Between Eversource Energy and OPAL Fuels

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

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

Diversification Opportunities for Eversource Energy and OPAL Fuels

0.65

Correlation Coefficient

Eversource Energy  OPAL Fuels

Poor diversification

The 3 months correlation between Eversource and OPAL is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Eversource Energy and OPAL Fuels in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on OPAL Fuels 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 OPAL Fuels. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of OPAL Fuels has no effect on the direction of Eversource Energy i.e., Eversource Energy and OPAL Fuels go up and down completely randomly.

Pair Corralation between Eversource Energy and OPAL Fuels

Allowing for the 90-day total investment horizon Eversource Energy is expected to generate 3.12 times less return on investment than OPAL Fuels. But when comparing it to its historical volatility, Eversource Energy is 4.2 times less risky than OPAL Fuels. It trades about 0.19 of its potential returns per unit of risk. OPAL Fuels is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  174.00  in OPAL Fuels on April 25, 2025 and sell it today you would earn a total of  83.00  from holding OPAL Fuels or generate 47.7% return on investment over 90 days.

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

Eversource Energy  vs.  OPAL Fuels

Eversource Energy

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Eversource Energy are ranked lower than 14 (%) 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.

OPAL Fuels

Risk-Adjusted Performance

OK

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

Pair Trading with Eversource Energy and OPAL Fuels

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

The idea behind Eversource Energy and OPAL Fuels 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.