Correlation Between Duke Energy and PPL
Can any of the company-specific risk be diversified away by investing in both Duke Energy and PPL 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 Duke Energy and PPL into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Duke Energy and PPL Corporation, you can compare the effects of market volatilities on Duke Energy and PPL 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 Duke Energy with a short position of PPL. Check out your portfolio center. Please also check ongoing floating volatility patterns of Duke Energy and PPL.
Diversification Opportunities for Duke Energy and PPL
0.17 | Correlation Coefficient |
Average diversification
The 3 months correlation between Duke and PPL is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding Duke Energy and PPL Corp. in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PPL Corporation and Duke 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 Duke Energy are associated (or correlated) with PPL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PPL Corporation has no effect on the direction of Duke Energy i.e., Duke Energy and PPL go up and down completely randomly.
Pair Corralation between Duke Energy and PPL
Considering the 90-day investment horizon Duke Energy is expected to generate 1.05 times less return on investment than PPL. But when comparing it to its historical volatility, Duke Energy is 1.02 times less risky than PPL. It trades about 0.05 of its potential returns per unit of risk. PPL Corporation is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 2,717 in PPL Corporation on August 30, 2024 and sell it today you would earn a total of 783.00 from holding PPL Corporation or generate 28.82% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Duke Energy vs. PPL Corp.
Performance |
| Timeline |
| Duke Energy |
| PPL Corporation |
Duke Energy and PPL Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Duke Energy and PPL
The main advantage of trading using opposite Duke Energy and PPL positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Duke Energy position performs unexpectedly, PPL 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 PPL will offset losses from the drop in PPL's long position.| Duke Energy vs. Consolidated Edison | Duke Energy vs. Dominion Energy | Duke Energy vs. American Electric Power | Duke Energy vs. Nextera Energy |
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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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