Correlation Between MGE Energy and IDACORP
Can any of the company-specific risk be diversified away by investing in both MGE Energy and IDACORP 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 MGE Energy and IDACORP into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between MGE Energy and IDACORP, you can compare the effects of market volatilities on MGE Energy and IDACORP 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 MGE Energy with a short position of IDACORP. Check out your portfolio center. Please also check ongoing floating volatility patterns of MGE Energy and IDACORP.
Diversification Opportunities for MGE Energy and IDACORP
0.9 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between MGE and IDACORP is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding MGE Energy and IDACORP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IDACORP and MGE Energy 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 MGE Energy are associated (or correlated) with IDACORP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of IDACORP has no effect on the direction of MGE Energy i.e., MGE Energy and IDACORP go up and down completely randomly.
Pair Corralation between MGE Energy and IDACORP
Given the investment horizon of 90 days MGE Energy is expected to generate 1.45 times more return on investment than IDACORP. However, MGE Energy is 1.45 times more volatile than IDACORP. It trades about 0.04 of its potential returns per unit of risk. IDACORP is currently generating about 0.03 per unit of risk. If you would invest 6,728 in MGE Energy on November 5, 2024 and sell it today you would earn a total of 2,257 from holding MGE Energy or generate 33.55% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
MGE Energy vs. IDACORP
Performance |
| Timeline |
| MGE Energy |
| IDACORP |
MGE Energy and IDACORP Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with MGE Energy and IDACORP
The main advantage of trading using opposite MGE Energy and IDACORP positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MGE Energy position performs unexpectedly, IDACORP 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 IDACORP will offset losses from the drop in IDACORP's long position.| MGE Energy vs. CMS Energy | MGE Energy vs. Ameren Corp | MGE Energy vs. Pinnacle West Capital | MGE Energy vs. Evergy, |
| 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.
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