Correlation Between National Grid and Pacific Gas
Can any of the company-specific risk be diversified away by investing in both National Grid and Pacific Gas 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 National Grid and Pacific Gas into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between National Grid PLC and Pacific Gas and, you can compare the effects of market volatilities on National Grid and Pacific Gas 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 National Grid with a short position of Pacific Gas. Check out your portfolio center. Please also check ongoing floating volatility patterns of National Grid and Pacific Gas.
Diversification Opportunities for National Grid and Pacific Gas
-0.33 | Correlation Coefficient |
Very good diversification
The 3 months correlation between National and Pacific is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding National Grid PLC and Pacific Gas and in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pacific Gas and National Grid 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 National Grid PLC are associated (or correlated) with Pacific Gas. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pacific Gas has no effect on the direction of National Grid i.e., National Grid and Pacific Gas go up and down completely randomly.
Pair Corralation between National Grid and Pacific Gas
Considering the 90-day investment horizon National Grid PLC is expected to generate 1.2 times more return on investment than Pacific Gas. However, National Grid is 1.2 times more volatile than Pacific Gas and. It trades about -0.04 of its potential returns per unit of risk. Pacific Gas and is currently generating about -0.1 per unit of risk. If you would invest 6,402 in National Grid PLC on August 31, 2024 and sell it today you would lose (69.00) from holding National Grid PLC or give up 1.08% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
National Grid PLC vs. Pacific Gas and
Performance |
| Timeline |
| National Grid PLC |
| Pacific Gas |
National Grid and Pacific Gas Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with National Grid and Pacific Gas
The main advantage of trading using opposite National Grid and Pacific Gas positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if National Grid position performs unexpectedly, Pacific Gas 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 Pacific Gas will offset losses from the drop in Pacific Gas' long position.| National Grid vs. CenterPoint Energy | National Grid vs. CMS Energy | National Grid vs. IDACORP | National Grid vs. Portland General Electric |
| Pacific Gas vs. Nextera Energy | Pacific Gas vs. Duke Energy | Pacific Gas vs. PGE Corp | Pacific Gas vs. Southern Company |
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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.
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