Correlation Between Exelon and Pinnacle West
Can any of the company-specific risk be diversified away by investing in both Exelon 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 Exelon and Pinnacle West into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Exelon and Pinnacle West Capital, you can compare the effects of market volatilities on Exelon 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 Exelon with a short position of Pinnacle West. Check out your portfolio center. Please also check ongoing floating volatility patterns of Exelon and Pinnacle West.
Diversification Opportunities for Exelon and Pinnacle West
0.06 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Exelon and Pinnacle is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding Exelon 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 Exelon 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 Exelon 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 Exelon i.e., Exelon and Pinnacle West go up and down completely randomly.
Pair Corralation between Exelon and Pinnacle West
Considering the 90-day investment horizon Exelon is expected to under-perform the Pinnacle West. But the stock apears to be less risky and, when comparing its historical volatility, Exelon is 1.16 times less risky than Pinnacle West. The stock trades about -0.11 of its potential returns per unit of risk. The Pinnacle West Capital is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest 8,731 in Pinnacle West Capital on August 27, 2024 and sell it today you would earn a total of 557.00 from holding Pinnacle West Capital or generate 6.38% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Exelon vs. Pinnacle West Capital
Performance |
| Timeline |
| Exelon |
| Pinnacle West Capital |
Exelon and Pinnacle West Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Exelon and Pinnacle West
The main advantage of trading using opposite Exelon and Pinnacle West positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Exelon 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.| Exelon vs. Duke Energy | Exelon vs. Dominion Energy | Exelon vs. Southern Company | Exelon vs. Consolidated Edison |
| Pinnacle West vs. CMS Energy | Pinnacle West vs. Ameren Corp | Pinnacle West vs. MGE Energy | Pinnacle West 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.
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