Correlation Between Entergy Texas and IDACORP
Can any of the company-specific risk be diversified away by investing in both Entergy Texas and IDACORP 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 Entergy Texas and IDACORP into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Entergy Texas and IDACORP, you can compare the effects of market volatilities on Entergy Texas and IDACORP 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 Entergy Texas with a short position of IDACORP. Check out your portfolio center. Please also check ongoing floating volatility patterns of Entergy Texas and IDACORP.
Diversification Opportunities for Entergy Texas and IDACORP
0.18 | Correlation Coefficient |
Average diversification
The 3 months correlation between Entergy and IDACORP is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding Entergy Texas and IDACORP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IDACORP and Entergy Texas 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 Entergy Texas are associated (or correlated) with IDACORP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of IDACORP has no effect on the direction of Entergy Texas i.e., Entergy Texas and IDACORP go up and down completely randomly.
Pair Corralation between Entergy Texas and IDACORP
Assuming the 90 days horizon Entergy Texas is expected to generate 8.33 times less return on investment than IDACORP. But when comparing it to its historical volatility, Entergy Texas is 1.8 times less risky than IDACORP. It trades about 0.1 of its potential returns per unit of risk. IDACORP is currently generating about 0.45 of returns per unit of risk over similar time horizon. If you would invest 10,414 in IDACORP on August 24, 2024 and sell it today you would earn a total of 1,466 from holding IDACORP or generate 14.08% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Entergy Texas vs. IDACORP
Performance |
| Timeline |
| Entergy Texas |
| IDACORP |
Entergy Texas and IDACORP Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Entergy Texas and IDACORP
The main advantage of trading using opposite Entergy Texas and IDACORP positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Entergy Texas position performs unexpectedly, IDACORP 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 IDACORP will offset losses from the drop in IDACORP's long position.The idea behind Entergy Texas and IDACORP pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| IDACORP vs. CMS Energy | IDACORP vs. Pinnacle West Capital | IDACORP vs. Alliant Energy Corp | IDACORP vs. Portland General Electric |
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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.
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