Correlation Between CenterPoint Energy and OGE Energy
Can any of the company-specific risk be diversified away by investing in both CenterPoint Energy and OGE Energy 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 CenterPoint Energy and OGE Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between CenterPoint Energy and OGE Energy, you can compare the effects of market volatilities on CenterPoint Energy and OGE Energy 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 CenterPoint Energy with a short position of OGE Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of CenterPoint Energy and OGE Energy.
Diversification Opportunities for CenterPoint Energy and OGE Energy
0.81 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between CenterPoint and OGE is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding CenterPoint Energy and OGE Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on OGE Energy and CenterPoint 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 CenterPoint Energy are associated (or correlated) with OGE Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of OGE Energy has no effect on the direction of CenterPoint Energy i.e., CenterPoint Energy and OGE Energy go up and down completely randomly.
Pair Corralation between CenterPoint Energy and OGE Energy
Considering the 90-day investment horizon CenterPoint Energy is expected to generate 1.68 times less return on investment than OGE Energy. In addition to that, CenterPoint Energy is 1.08 times more volatile than OGE Energy. It trades about 0.02 of its total potential returns per unit of risk. OGE Energy is currently generating about 0.04 per unit of volatility. If you would invest 3,639 in OGE Energy on August 27, 2024 and sell it today you would earn a total of 742.00 from holding OGE Energy or generate 20.39% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
CenterPoint Energy vs. OGE Energy
Performance |
| Timeline |
| CenterPoint Energy |
| OGE Energy |
CenterPoint Energy and OGE Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with CenterPoint Energy and OGE Energy
The main advantage of trading using opposite CenterPoint Energy and OGE Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CenterPoint Energy position performs unexpectedly, OGE Energy 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 OGE Energy will offset losses from the drop in OGE Energy's long position.| CenterPoint Energy vs. Entergy | CenterPoint Energy vs. Ameren Corp | CenterPoint Energy vs. Alliant Energy Corp | CenterPoint Energy vs. Pinnacle West Capital |
| OGE Energy vs. Alliant Energy Corp | OGE Energy vs. CMS Energy | OGE Energy vs. CenterPoint Energy | OGE Energy vs. Pinnacle West Capital |
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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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