Correlation Between PGE Corp and Consumers Energy
Can any of the company-specific risk be diversified away by investing in both PGE Corp and Consumers Energy 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 Consumers Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between PGE Corp and Consumers Energy, you can compare the effects of market volatilities on PGE Corp and Consumers Energy 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 Consumers Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of PGE Corp and Consumers Energy.
Diversification Opportunities for PGE Corp and Consumers Energy
0.09 | Correlation Coefficient |
Significant diversification
The 3 months correlation between PGE and Consumers is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding PGE Corp and Consumers Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Consumers Energy 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 Consumers Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Consumers Energy has no effect on the direction of PGE Corp i.e., PGE Corp and Consumers Energy go up and down completely randomly.
Pair Corralation between PGE Corp and Consumers Energy
Considering the 90-day investment horizon PGE Corp is expected to generate 0.73 times more return on investment than Consumers Energy. However, PGE Corp is 1.38 times less risky than Consumers Energy. It trades about 0.17 of its potential returns per unit of risk. Consumers Energy is currently generating about -0.19 per unit of risk. If you would invest 2,051 in PGE Corp on August 28, 2024 and sell it today you would earn a total of 68.00 from holding PGE Corp or generate 3.32% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
PGE Corp vs. Consumers Energy
Performance |
| Timeline |
| PGE Corp |
| Consumers Energy |
PGE Corp and Consumers Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with PGE Corp and Consumers Energy
The main advantage of trading using opposite PGE Corp and Consumers Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PGE Corp position performs unexpectedly, Consumers Energy 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 Consumers Energy will offset losses from the drop in Consumers Energy's long position.| PGE Corp vs. Consolidated Edison | PGE Corp vs. Southern Company | PGE Corp vs. Entergy | PGE Corp vs. Pinnacle West Capital |
| Consumers Energy vs. Nextera Energy | Consumers Energy vs. Duke Energy | Consumers Energy vs. PGE Corp | Consumers Energy 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
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