Correlation Between PGE Corp and Croghan Bancshares
Can any of the company-specific risk be diversified away by investing in both PGE Corp and Croghan Bancshares 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 Corp and Croghan Bancshares into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between PGE Corp and Croghan Bancshares, you can compare the effects of market volatilities on PGE Corp and Croghan Bancshares 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 Corp with a short position of Croghan Bancshares. Check out your portfolio center. Please also check ongoing floating volatility patterns of PGE Corp and Croghan Bancshares.
Diversification Opportunities for PGE Corp and Croghan Bancshares
0.7 | Correlation Coefficient |
Poor diversification
The 3 months correlation between PGE and Croghan is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding PGE Corp and Croghan Bancshares in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Croghan Bancshares and PGE Corp 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 Corp are associated (or correlated) with Croghan Bancshares. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Croghan Bancshares has no effect on the direction of PGE Corp i.e., PGE Corp and Croghan Bancshares go up and down completely randomly.
Pair Corralation between PGE Corp and Croghan Bancshares
Considering the 90-day investment horizon PGE Corp is expected to generate 0.94 times more return on investment than Croghan Bancshares. However, PGE Corp is 1.06 times less risky than Croghan Bancshares. It trades about 0.06 of its potential returns per unit of risk. Croghan Bancshares is currently generating about 0.05 per unit of risk. If you would invest 1,759 in PGE Corp on September 4, 2024 and sell it today you would earn a total of 296.00 from holding PGE Corp or generate 16.83% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 86.64% |
| Values | Daily Returns |
PGE Corp vs. Croghan Bancshares
Performance |
| Timeline |
| PGE Corp |
| Croghan Bancshares |
PGE Corp and Croghan Bancshares Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with PGE Corp and Croghan Bancshares
The main advantage of trading using opposite PGE Corp and Croghan Bancshares positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PGE Corp position performs unexpectedly, Croghan Bancshares 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 Croghan Bancshares will offset losses from the drop in Croghan Bancshares' long position.| PGE Corp vs. Consolidated Edison | PGE Corp vs. Southern Company | PGE Corp vs. Entergy | PGE Corp vs. Pinnacle West Capital |
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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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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