Correlation Between Entergy Texas and MGE Energy
Can any of the company-specific risk be diversified away by investing in both Entergy Texas and MGE 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 Entergy Texas and MGE Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Entergy Texas and MGE Energy, you can compare the effects of market volatilities on Entergy Texas and MGE 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 Entergy Texas with a short position of MGE Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Entergy Texas and MGE Energy.
Diversification Opportunities for Entergy Texas and MGE Energy
0.44 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Entergy and MGE is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Entergy Texas and MGE Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MGE Energy 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 MGE Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MGE Energy has no effect on the direction of Entergy Texas i.e., Entergy Texas and MGE Energy go up and down completely randomly.
Pair Corralation between Entergy Texas and MGE Energy
Assuming the 90 days horizon Entergy Texas is expected to generate 2.94 times less return on investment than MGE Energy. But when comparing it to its historical volatility, Entergy Texas is 2.33 times less risky than MGE Energy. It trades about 0.15 of its potential returns per unit of risk. MGE Energy is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest 7,586 in MGE Energy on August 27, 2024 and sell it today you would earn a total of 2,889 from holding MGE Energy or generate 38.08% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Entergy Texas vs. MGE Energy
Performance |
| Timeline |
| Entergy Texas |
| MGE Energy |
Entergy Texas and MGE Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Entergy Texas and MGE Energy
The main advantage of trading using opposite Entergy Texas and MGE Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Entergy Texas position performs unexpectedly, MGE 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 MGE Energy will offset losses from the drop in MGE Energy's long position.| Entergy Texas vs. Duke Energy | Entergy Texas vs. Spire Inc | Entergy Texas vs. CMS Energy | Entergy Texas vs. Aquagold International |
| MGE Energy vs. CMS Energy | MGE Energy vs. Ameren Corp | MGE Energy vs. Pinnacle West Capital | MGE Energy vs. Evergy, |
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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.
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