Correlation Between Eversource Energy and OGE Energy
Can any of the company-specific risk be diversified away by investing in both Eversource 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 Eversource 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 Eversource Energy and OGE Energy, you can compare the effects of market volatilities on Eversource 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 Eversource Energy with a short position of OGE Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Eversource Energy and OGE Energy.
Diversification Opportunities for Eversource Energy and OGE Energy
-0.7 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Eversource and OGE is -0.7. Overlapping area represents the amount of risk that can be diversified away by holding Eversource Energy and OGE Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on OGE Energy and Eversource 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 Eversource 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 Eversource Energy i.e., Eversource Energy and OGE Energy go up and down completely randomly.
Pair Corralation between Eversource Energy and OGE Energy
Allowing for the 90-day total investment horizon Eversource Energy is expected to under-perform the OGE Energy. But the stock apears to be less risky and, when comparing its historical volatility, Eversource Energy is 1.04 times less risky than OGE Energy. The stock trades about -0.12 of its potential returns per unit of risk. The OGE Energy is currently generating about 0.25 of returns per unit of risk over similar time horizon. If you would invest 4,065 in OGE Energy on August 28, 2024 and sell it today you would earn a total of 320.00 from holding OGE Energy or generate 7.87% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Eversource Energy vs. OGE Energy
Performance |
| Timeline |
| Eversource Energy |
| OGE Energy |
Eversource Energy and OGE Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Eversource Energy and OGE Energy
The main advantage of trading using opposite Eversource Energy and OGE Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Eversource 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.| Eversource Energy vs. CenterPoint Energy | Eversource Energy vs. FirstEnergy | Eversource Energy vs. Pinnacle West Capital | Eversource Energy vs. Edison International |
| 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.
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