Correlation Between Consumers Energy and Pinnacle West
Can any of the company-specific risk be diversified away by investing in both Consumers Energy and Pinnacle West 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 Consumers Energy and Pinnacle West into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Consumers Energy and Pinnacle West Capital, you can compare the effects of market volatilities on Consumers Energy and Pinnacle West 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 Consumers Energy with a short position of Pinnacle West. Check out your portfolio center. Please also check ongoing floating volatility patterns of Consumers Energy and Pinnacle West.
Diversification Opportunities for Consumers Energy and Pinnacle West
-0.45 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Consumers and Pinnacle is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding Consumers Energy and Pinnacle West Capital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pinnacle West Capital and Consumers 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 Consumers Energy are associated (or correlated) with Pinnacle West. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pinnacle West Capital has no effect on the direction of Consumers Energy i.e., Consumers Energy and Pinnacle West go up and down completely randomly.
Pair Corralation between Consumers Energy and Pinnacle West
Assuming the 90 days trading horizon Consumers Energy is expected to generate 5.94 times less return on investment than Pinnacle West. In addition to that, Consumers Energy is 1.32 times more volatile than Pinnacle West Capital. It trades about 0.01 of its total potential returns per unit of risk. Pinnacle West Capital is currently generating about 0.05 per unit of volatility. If you would invest 7,082 in Pinnacle West Capital on August 30, 2024 and sell it today you would earn a total of 2,370 from holding Pinnacle West Capital or generate 33.47% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Consumers Energy vs. Pinnacle West Capital
Performance |
| Timeline |
| Consumers Energy |
| Pinnacle West Capital |
Consumers Energy and Pinnacle West Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Consumers Energy and Pinnacle West
The main advantage of trading using opposite Consumers Energy and Pinnacle West positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Consumers Energy position performs unexpectedly, Pinnacle West 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 Pinnacle West will offset losses from the drop in Pinnacle West's long position.| Consumers Energy vs. Nextera Energy | Consumers Energy vs. Duke Energy | Consumers Energy vs. PGE Corp | Consumers Energy vs. Southern Company |
| Pinnacle West vs. CMS Energy | Pinnacle West vs. Ameren Corp | Pinnacle West vs. MGE Energy | Pinnacle West vs. Evergy, |
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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.
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