Correlation Between Pacific Gas and Ameren Illinois
Can any of the company-specific risk be diversified away by investing in both Pacific Gas and Ameren Illinois 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 Pacific Gas and Ameren Illinois into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Pacific Gas and and Ameren Illinois, you can compare the effects of market volatilities on Pacific Gas and Ameren Illinois 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 Pacific Gas with a short position of Ameren Illinois. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pacific Gas and Ameren Illinois.
Diversification Opportunities for Pacific Gas and Ameren Illinois
0.01 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Pacific and Ameren is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding Pacific Gas and and Ameren Illinois in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ameren Illinois and Pacific Gas 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 Pacific Gas and are associated (or correlated) with Ameren Illinois. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ameren Illinois has no effect on the direction of Pacific Gas i.e., Pacific Gas and Ameren Illinois go up and down completely randomly.
Pair Corralation between Pacific Gas and Ameren Illinois
Assuming the 90 days trading horizon Pacific Gas and is expected to under-perform the Ameren Illinois. But the preferred stock apears to be less risky and, when comparing its historical volatility, Pacific Gas and is 1.0 times less risky than Ameren Illinois. The preferred stock trades about -0.11 of its potential returns per unit of risk. The Ameren Illinois is currently generating about -0.08 of returns per unit of risk over similar time horizon. If you would invest 7,180 in Ameren Illinois on October 26, 2024 and sell it today you would lose (724.00) from holding Ameren Illinois or give up 10.08% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 98.33% |
| Values | Daily Returns |
Pacific Gas and vs. Ameren Illinois
Performance |
| Timeline |
| Pacific Gas |
| Ameren Illinois |
Pacific Gas and Ameren Illinois Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Pacific Gas and Ameren Illinois
The main advantage of trading using opposite Pacific Gas and Ameren Illinois positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Pacific Gas position performs unexpectedly, Ameren Illinois 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 Ameren Illinois will offset losses from the drop in Ameren Illinois' long position.| Pacific Gas vs. Pacific Gas and | Pacific Gas vs. Pacific Gas and | Pacific Gas vs. Pacific Gas and | Pacific Gas vs. Pacific Gas and |
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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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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