Correlation Between Consumers Energy and PacifiCorp
Can any of the company-specific risk be diversified away by investing in both Consumers Energy 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 Consumers Energy and PacifiCorp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Consumers Energy and PacifiCorp, you can compare the effects of market volatilities on Consumers Energy 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 Consumers Energy with a short position of PacifiCorp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Consumers Energy and PacifiCorp.
Diversification Opportunities for Consumers Energy and PacifiCorp
0.27 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Consumers and PacifiCorp is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding Consumers Energy and PacifiCorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PacifiCorp 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 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 Consumers Energy i.e., Consumers Energy and PacifiCorp go up and down completely randomly.
Pair Corralation between Consumers Energy and PacifiCorp
Assuming the 90 days trading horizon Consumers Energy is expected to generate 0.39 times more return on investment than PacifiCorp. However, Consumers Energy is 2.55 times less risky than PacifiCorp. It trades about -0.19 of its potential returns per unit of risk. PacifiCorp is currently generating about -0.09 per unit of risk. If you would invest 8,563 in Consumers Energy on August 29, 2024 and sell it today you would lose (462.00) from holding Consumers Energy or give up 5.4% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Consumers Energy vs. PacifiCorp
Performance |
| Timeline |
| Consumers Energy |
| PacifiCorp |
Consumers Energy and PacifiCorp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Consumers Energy and PacifiCorp
The main advantage of trading using opposite Consumers Energy and PacifiCorp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Consumers Energy 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.| Consumers Energy vs. Nextera Energy | Consumers Energy vs. Duke Energy | Consumers Energy vs. PGE Corp | Consumers Energy vs. Southern Company |
| PacifiCorp vs. Enersys | PacifiCorp vs. Alliant Energy Corp | PacifiCorp vs. Electrovaya Common Shares | PacifiCorp vs. Sandstorm Gold Ltd |
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 Equity Valuation module to check real value of public entities based on technical and fundamental data.
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