Correlation Between IDACORP and PPL
Can any of the company-specific risk be diversified away by investing in both IDACORP 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 IDACORP and PPL into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between IDACORP and PPL Corporation, you can compare the effects of market volatilities on IDACORP 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 IDACORP with a short position of PPL. Check out your portfolio center. Please also check ongoing floating volatility patterns of IDACORP and PPL.
Diversification Opportunities for IDACORP and PPL
Very poor diversification
The 3 months correlation between IDACORP and PPL is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding IDACORP and PPL Corp. in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PPL Corporation and IDACORP 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 IDACORP 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 IDACORP i.e., IDACORP and PPL go up and down completely randomly.
Pair Corralation between IDACORP and PPL
Considering the 90-day investment horizon IDACORP is expected to generate 0.95 times more return on investment than PPL. However, IDACORP is 1.05 times less risky than PPL. It trades about 0.36 of its potential returns per unit of risk. PPL Corporation is currently generating about 0.14 per unit of risk. If you would invest 10,093 in IDACORP on September 3, 2024 and sell it today you would earn a total of 1,754 from holding IDACORP or generate 17.38% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
IDACORP vs. PPL Corp.
Performance |
| Timeline |
| IDACORP |
| PPL Corporation |
IDACORP and PPL Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IDACORP and PPL
The main advantage of trading using opposite IDACORP and PPL positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IDACORP 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.| 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.
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