Correlation Between MGE Energy and PNM Resources
Can any of the company-specific risk be diversified away by investing in both MGE Energy and PNM Resources 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 PNM Resources into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between MGE Energy and PNM Resources, you can compare the effects of market volatilities on MGE Energy and PNM Resources 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 PNM Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of MGE Energy and PNM Resources.
Diversification Opportunities for MGE Energy and PNM Resources
0.77 | Correlation Coefficient |
Poor diversification
The 3 months correlation between MGE and PNM is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding MGE Energy and PNM Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PNM Resources 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 PNM Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PNM Resources has no effect on the direction of MGE Energy i.e., MGE Energy and PNM Resources go up and down completely randomly.
Pair Corralation between MGE Energy and PNM Resources
If you would invest 9,169 in MGE Energy on August 27, 2024 and sell it today you would earn a total of 1,245 from holding MGE Energy or generate 13.58% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 4.76% |
| Values | Daily Returns |
MGE Energy vs. PNM Resources
Performance |
| Timeline |
| MGE Energy |
| PNM Resources |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Solid
MGE Energy and PNM Resources Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with MGE Energy and PNM Resources
The main advantage of trading using opposite MGE Energy and PNM Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MGE Energy position performs unexpectedly, PNM Resources 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 PNM Resources will offset losses from the drop in PNM Resources' long position.| MGE Energy vs. CMS Energy | MGE Energy vs. Ameren Corp | MGE Energy vs. Pinnacle West Capital | MGE Energy vs. Evergy, |
| PNM Resources vs. Portland General Electric | PNM Resources vs. MGE Energy | PNM Resources vs. CMS Energy | PNM Resources vs. OGE Energy |
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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