Correlation Between Pinnacle West and CenterPoint Energy
Can any of the company-specific risk be diversified away by investing in both Pinnacle West and CenterPoint 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 Pinnacle West and CenterPoint Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Pinnacle West Capital and CenterPoint Energy, you can compare the effects of market volatilities on Pinnacle West and CenterPoint 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 Pinnacle West with a short position of CenterPoint Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pinnacle West and CenterPoint Energy.
Diversification Opportunities for Pinnacle West and CenterPoint Energy
0.41 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Pinnacle and CenterPoint is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Pinnacle West Capital and CenterPoint Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CenterPoint Energy and Pinnacle West 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 Pinnacle West Capital are associated (or correlated) with CenterPoint Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CenterPoint Energy has no effect on the direction of Pinnacle West i.e., Pinnacle West and CenterPoint Energy go up and down completely randomly.
Pair Corralation between Pinnacle West and CenterPoint Energy
Considering the 90-day investment horizon Pinnacle West Capital is expected to generate 0.77 times more return on investment than CenterPoint Energy. However, Pinnacle West Capital is 1.29 times less risky than CenterPoint Energy. It trades about 0.17 of its potential returns per unit of risk. CenterPoint Energy is currently generating about 0.05 per unit of risk. If you would invest 7,490 in Pinnacle West Capital on August 24, 2024 and sell it today you would earn a total of 1,872 from holding Pinnacle West Capital or generate 24.99% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Pinnacle West Capital vs. CenterPoint Energy
Performance |
| Timeline |
| Pinnacle West Capital |
| CenterPoint Energy |
Pinnacle West and CenterPoint Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Pinnacle West and CenterPoint Energy
The main advantage of trading using opposite Pinnacle West and CenterPoint Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Pinnacle West position performs unexpectedly, CenterPoint 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 CenterPoint Energy will offset losses from the drop in CenterPoint Energy's long position.| Pinnacle West vs. CMS Energy | Pinnacle West vs. Ameren Corp | Pinnacle West vs. MGE Energy | Pinnacle West vs. Evergy, |
| CenterPoint Energy vs. DTE Energy | CenterPoint Energy vs. Alliant Energy Corp | CenterPoint Energy vs. Ameren Corp | CenterPoint Energy vs. Pinnacle West Capital |
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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
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