Correlation Between NorthWestern and Entergy

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

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

Diversification Opportunities for NorthWestern and Entergy

0.08

Correlation Coefficient

NorthWestern  Entergy

Significant diversification

The 3 months correlation between NorthWestern and Entergy is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding NorthWestern and Entergy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Entergy and NorthWestern 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 NorthWestern are associated (or correlated) with Entergy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Entergy has no effect on the direction of NorthWestern i.e., NorthWestern and Entergy go up and down completely randomly.

Pair Corralation between NorthWestern and Entergy

Considering the 90-day investment horizon NorthWestern is expected to under-perform the Entergy. In addition to that, NorthWestern is 1.0 times more volatile than Entergy. It trades about -0.05 of its total potential returns per unit of risk. Entergy is currently generating about 0.13 per unit of volatility. If you would invest  8,424  in Entergy on May 7, 2025 and sell it today you would earn a total of  738.00  from holding Entergy or generate 8.76% return on investment over 90 days.

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

NorthWestern  vs.  Entergy

NorthWestern

Risk-Adjusted Performance

Very Weak

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

Entergy

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Entergy are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Entergy may actually be approaching a critical reversion point that can send shares even higher in September 2025.

Pair Trading with NorthWestern and Entergy

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

The idea behind NorthWestern and Entergy 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.