Correlation Between Entergy and PGE Corp
Can any of the company-specific risk be diversified away by investing in both Entergy and PGE Corp 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 and PGE Corp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Entergy and PGE Corp, you can compare the effects of market volatilities on Entergy and PGE Corp 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 with a short position of PGE Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Entergy and PGE Corp.
Diversification Opportunities for Entergy and PGE Corp
Pay attention - limited upside
The 3 months correlation between Entergy and PGE is -0.74. Overlapping area represents the amount of risk that can be diversified away by holding Entergy and PGE Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PGE Corp and Entergy 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 are associated (or correlated) with PGE Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PGE Corp has no effect on the direction of Entergy i.e., Entergy and PGE Corp go up and down completely randomly.
Pair Corralation between Entergy and PGE Corp
Considering the 90-day investment horizon Entergy is expected to generate 0.51 times more return on investment than PGE Corp. However, Entergy is 1.97 times less risky than PGE Corp. It trades about 0.24 of its potential returns per unit of risk. PGE Corp is currently generating about -0.3 per unit of risk. If you would invest 7,660 in Entergy on November 9, 2024 and sell it today you would earn a total of 619.00 from holding Entergy or generate 8.08% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Entergy vs. PGE Corp
Performance |
| Timeline |
| Entergy |
| PGE Corp |
Entergy and PGE Corp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Entergy and PGE Corp
The main advantage of trading using opposite Entergy and PGE Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Entergy position performs unexpectedly, PGE Corp 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 PGE Corp will offset losses from the drop in PGE Corp's long position.The idea behind Entergy and PGE Corp 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.| PGE Corp vs. Consolidated Edison | PGE Corp vs. Southern Company | PGE Corp vs. Entergy | PGE Corp 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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