Correlation Between Eversource Energy and Pinnacle West
Can any of the company-specific risk be diversified away by investing in both Eversource 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 Eversource 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 Eversource Energy and Pinnacle West Capital, you can compare the effects of market volatilities on Eversource 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 Eversource Energy with a short position of Pinnacle West. Check out your portfolio center. Please also check ongoing floating volatility patterns of Eversource Energy and Pinnacle West.
Diversification Opportunities for Eversource Energy and Pinnacle West
-0.39 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Eversource and Pinnacle is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding Eversource 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 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 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 Eversource Energy i.e., Eversource Energy and Pinnacle West go up and down completely randomly.
Pair Corralation between Eversource Energy and Pinnacle West
Allowing for the 90-day total investment horizon Eversource Energy is expected to under-perform the Pinnacle West. In addition to that, Eversource Energy is 1.2 times more volatile than Pinnacle West Capital. It trades about -0.02 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 7,133 in Pinnacle West Capital on August 27, 2024 and sell it today you would earn a total of 2,160 from holding Pinnacle West Capital or generate 30.28% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Eversource Energy vs. Pinnacle West Capital
Performance |
| Timeline |
| Eversource Energy |
| Pinnacle West Capital |
Eversource Energy and Pinnacle West Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Eversource Energy and Pinnacle West
The main advantage of trading using opposite Eversource Energy and Pinnacle West positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Eversource 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.| Eversource Energy vs. CenterPoint Energy | Eversource Energy vs. FirstEnergy | Eversource Energy vs. Pinnacle West Capital | Eversource Energy vs. Edison International |
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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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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