Correlation Between Pinnacle West and METRO AG
Can any of the company-specific risk be diversified away by investing in both Pinnacle West and METRO AG 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 Pinnacle West and METRO AG into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Pinnacle West Capital and METRO AG, you can compare the effects of market volatilities on Pinnacle West and METRO AG 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 Pinnacle West with a short position of METRO AG. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pinnacle West and METRO AG.
Diversification Opportunities for Pinnacle West and METRO AG
-0.52 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Pinnacle and METRO is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding Pinnacle West Capital and METRO AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on METRO AG and Pinnacle West 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 Pinnacle West Capital are associated (or correlated) with METRO AG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of METRO AG has no effect on the direction of Pinnacle West i.e., Pinnacle West and METRO AG go up and down completely randomly.
Pair Corralation between Pinnacle West and METRO AG
Assuming the 90 days trading horizon Pinnacle West Capital is expected to generate 0.87 times more return on investment than METRO AG. However, Pinnacle West Capital is 1.15 times less risky than METRO AG. It trades about 0.13 of its potential returns per unit of risk. METRO AG is currently generating about -0.13 per unit of risk. If you would invest 8,847 in Pinnacle West Capital on August 30, 2024 and sell it today you would earn a total of 650.00 from holding Pinnacle West Capital or generate 7.35% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Pinnacle West Capital vs. METRO AG
Performance |
| Timeline |
| Pinnacle West Capital |
| METRO AG |
Pinnacle West and METRO AG Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Pinnacle West and METRO AG
The main advantage of trading using opposite Pinnacle West and METRO AG positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Pinnacle West position performs unexpectedly, METRO AG 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 METRO AG will offset losses from the drop in METRO AG's long position.| Pinnacle West vs. Tungsten West PLC | Pinnacle West vs. Argo Group Limited | Pinnacle West vs. Hardide PLC | Pinnacle West vs. Versarien PLC |
| METRO AG vs. Lundin Mining Corp | METRO AG vs. Take Two Interactive Software | METRO AG vs. Thor Mining PLC | METRO AG vs. Pfeiffer Vacuum Technology |
Check out your portfolio center.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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.
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