Correlation Between Entergy and PPL
Can any of the company-specific risk be diversified away by investing in both Entergy and PPL 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 PPL into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Entergy and PPL Corporation, you can compare the effects of market volatilities on Entergy and PPL 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 PPL. Check out your portfolio center. Please also check ongoing floating volatility patterns of Entergy and PPL.
Diversification Opportunities for Entergy and PPL
Poor diversification
The 3 months correlation between Entergy and PPL is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Entergy and PPL Corp. in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PPL Corporation 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 PPL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PPL Corporation has no effect on the direction of Entergy i.e., Entergy and PPL go up and down completely randomly.
Pair Corralation between Entergy and PPL
Considering the 90-day investment horizon Entergy is expected to generate 1.28 times more return on investment than PPL. However, Entergy is 1.28 times more volatile than PPL Corporation. It trades about 0.06 of its potential returns per unit of risk. PPL Corporation is currently generating about 0.05 per unit of risk. If you would invest 10,756 in Entergy on August 30, 2024 and sell it today you would earn a total of 4,884 from holding Entergy or generate 45.41% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Entergy vs. PPL Corp.
Performance |
| Timeline |
| Entergy |
| PPL Corporation |
Entergy and PPL Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Entergy and PPL
The main advantage of trading using opposite Entergy and PPL positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Entergy position performs unexpectedly, PPL 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 PPL will offset losses from the drop in PPL's long position.| Entergy vs. Dominion Energy | Entergy vs. Consolidated Edison | Entergy vs. Eversource Energy | Entergy vs. FirstEnergy |
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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.
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