Correlation Between New Momentum and PacifiCorp
Can any of the company-specific risk be diversified away by investing in both New Momentum and PacifiCorp 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 New Momentum and PacifiCorp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between New Momentum and PacifiCorp, you can compare the effects of market volatilities on New Momentum and PacifiCorp 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 New Momentum with a short position of PacifiCorp. Check out your portfolio center. Please also check ongoing floating volatility patterns of New Momentum and PacifiCorp.
Diversification Opportunities for New Momentum and PacifiCorp
-0.67 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between New and PacifiCorp is -0.67. Overlapping area represents the amount of risk that can be diversified away by holding New Momentum and PacifiCorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PacifiCorp and New Momentum 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 New Momentum are associated (or correlated) with PacifiCorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PacifiCorp has no effect on the direction of New Momentum i.e., New Momentum and PacifiCorp go up and down completely randomly.
Pair Corralation between New Momentum and PacifiCorp
Given the investment horizon of 90 days New Momentum is expected to generate 1.23 times less return on investment than PacifiCorp. In addition to that, New Momentum is 1.4 times more volatile than PacifiCorp. It trades about 0.03 of its total potential returns per unit of risk. PacifiCorp is currently generating about 0.06 per unit of volatility. If you would invest 12,000 in PacifiCorp on August 29, 2024 and sell it today you would earn a total of 2,900 from holding PacifiCorp or generate 24.17% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 70.22% |
| Values | Daily Returns |
New Momentum vs. PacifiCorp
Performance |
| Timeline |
| New Momentum |
| PacifiCorp |
New Momentum and PacifiCorp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with New Momentum and PacifiCorp
The main advantage of trading using opposite New Momentum and PacifiCorp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if New Momentum position performs unexpectedly, PacifiCorp 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 PacifiCorp will offset losses from the drop in PacifiCorp's long position.| New Momentum vs. Booking Holdings | New Momentum vs. TripAdvisor | New Momentum vs. Airbnb Inc | New Momentum vs. Royal Caribbean Cruises |
| PacifiCorp vs. Axon Enterprise | PacifiCorp vs. Primega Group Holdings | PacifiCorp vs. Vertiv Holdings Co | PacifiCorp vs. IONQ Inc |
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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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