Correlation Between PGE and VERBUND AG
Can any of the company-specific risk be diversified away by investing in both PGE and VERBUND AG 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 PGE and VERBUND AG into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between PGE Corporation and VERBUND AG, you can compare the effects of market volatilities on PGE and VERBUND AG 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 PGE with a short position of VERBUND AG. Check out your portfolio center. Please also check ongoing floating volatility patterns of PGE and VERBUND AG.
Diversification Opportunities for PGE and VERBUND AG
0.29 | Correlation Coefficient |
Modest diversification
The 3 months correlation between PGE and VERBUND is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding PGE Corp. and VERBUND AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VERBUND AG and PGE 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 PGE Corporation are associated (or correlated) with VERBUND AG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VERBUND AG has no effect on the direction of PGE i.e., PGE and VERBUND AG go up and down completely randomly.
Pair Corralation between PGE and VERBUND AG
Assuming the 90 days horizon PGE Corporation is expected to under-perform the VERBUND AG. In addition to that, PGE is 1.65 times more volatile than VERBUND AG. It trades about -0.18 of its total potential returns per unit of risk. VERBUND AG is currently generating about 0.14 per unit of volatility. If you would invest 6,905 in VERBUND AG on October 21, 2024 and sell it today you would earn a total of 330.00 from holding VERBUND AG or generate 4.78% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
PGE Corp. vs. VERBUND AG
Performance |
| Timeline |
| PGE Corporation |
| VERBUND AG |
PGE and VERBUND AG Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with PGE and VERBUND AG
The main advantage of trading using opposite PGE and VERBUND AG positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PGE position performs unexpectedly, VERBUND AG 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 VERBUND AG will offset losses from the drop in VERBUND AG's long position.The idea behind PGE Corporation and VERBUND AG pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| VERBUND AG vs. NextEra Energy | VERBUND AG vs. The Southern | VERBUND AG vs. American Electric Power | VERBUND AG vs. PGE Corporation |
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 Equity Valuation module to check real value of public entities based on technical and fundamental data.
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