Correlation Between Canadian Utilities and PacifiCorp
Can any of the company-specific risk be diversified away by investing in both Canadian Utilities and PacifiCorp 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 Canadian Utilities and PacifiCorp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Canadian Utilities Limited and PacifiCorp, you can compare the effects of market volatilities on Canadian Utilities and PacifiCorp 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 Canadian Utilities with a short position of PacifiCorp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Canadian Utilities and PacifiCorp.
Diversification Opportunities for Canadian Utilities and PacifiCorp
0.16 | Correlation Coefficient |
Average diversification
The 3 months correlation between Canadian and PacifiCorp is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding Canadian Utilities Limited and PacifiCorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PacifiCorp and Canadian Utilities 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 Canadian Utilities Limited are associated (or correlated) with PacifiCorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PacifiCorp has no effect on the direction of Canadian Utilities i.e., Canadian Utilities and PacifiCorp go up and down completely randomly.
Pair Corralation between Canadian Utilities and PacifiCorp
Assuming the 90 days horizon Canadian Utilities is expected to generate 2.76 times less return on investment than PacifiCorp. But when comparing it to its historical volatility, Canadian Utilities Limited is 3.28 times less risky than PacifiCorp. It trades about 0.17 of its potential returns per unit of risk. PacifiCorp is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest 11,475 in PacifiCorp on September 13, 2024 and sell it today you would earn a total of 1,140 from holding PacifiCorp or generate 9.93% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Canadian Utilities Limited vs. PacifiCorp
Performance |
| Timeline |
| Canadian Utilities |
| PacifiCorp |
Canadian Utilities and PacifiCorp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Canadian Utilities and PacifiCorp
The main advantage of trading using opposite Canadian Utilities and PacifiCorp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Canadian Utilities position performs unexpectedly, PacifiCorp 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 PacifiCorp will offset losses from the drop in PacifiCorp's long position.| Canadian Utilities vs. AuraSource | Canadian Utilities vs. Energy of Minas | Canadian Utilities vs. Allete Inc | Canadian Utilities vs. Avista |
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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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.
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