Correlation Between PNM Old and Narragansett Electric
Can any of the company-specific risk be diversified away by investing in both PNM Old and Narragansett Electric 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 PNM Old and Narragansett Electric into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between PNM Old and The Narragansett Electric, you can compare the effects of market volatilities on PNM Old and Narragansett Electric 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 PNM Old with a short position of Narragansett Electric. Check out your portfolio center. Please also check ongoing floating volatility patterns of PNM Old and Narragansett Electric.
Diversification Opportunities for PNM Old and Narragansett Electric
0.71 | Correlation Coefficient |
Poor diversification
The 3 months correlation between PNM and Narragansett is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding PNM Old and The Narragansett Electric in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on The Narragansett Electric and PNM Old 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 PNM Old are associated (or correlated) with Narragansett Electric. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of The Narragansett Electric has no effect on the direction of PNM Old i.e., PNM Old and Narragansett Electric go up and down completely randomly.
Pair Corralation between PNM Old and Narragansett Electric
If you would invest 5,500 in The Narragansett Electric on October 11, 2024 and sell it today you would earn a total of 0.00 from holding The Narragansett Electric or generate 0.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
PNM Old vs. The Narragansett Electric
Performance |
| Timeline |
| PNM Old |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
| The Narragansett Electric |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
PNM Old and Narragansett Electric Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with PNM Old and Narragansett Electric
The main advantage of trading using opposite PNM Old and Narragansett Electric positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PNM Old position performs unexpectedly, Narragansett Electric 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 Narragansett Electric will offset losses from the drop in Narragansett Electric's long position.| PNM Old vs. Portland General Electric | PNM Old vs. MGE Energy | PNM Old vs. CMS Energy | PNM Old vs. OGE Energy |
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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 Equity Valuation module to check real value of public entities based on technical and fundamental data.
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