Correlation Between Pinnacle West and Duke Energy
Can any of the company-specific risk be diversified away by investing in both Pinnacle West and Duke 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 Duke 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 Duke Energy, you can compare the effects of market volatilities on Pinnacle West and Duke 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 Duke Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pinnacle West and Duke Energy.
Diversification Opportunities for Pinnacle West and Duke Energy
0.03 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Pinnacle and Duke is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding Pinnacle West Capital and Duke Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Duke 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 Duke Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Duke Energy has no effect on the direction of Pinnacle West i.e., Pinnacle West and Duke Energy go up and down completely randomly.
Pair Corralation between Pinnacle West and Duke Energy
Considering the 90-day investment horizon Pinnacle West Capital is expected to generate 1.14 times more return on investment than Duke Energy. However, Pinnacle West is 1.14 times more volatile than Duke Energy. It trades about 0.05 of its potential returns per unit of risk. Duke Energy is currently generating about 0.05 per unit of risk. If you would invest 7,133 in Pinnacle West Capital on August 27, 2024 and sell it today you would earn a total of 2,160 from holding Pinnacle West Capital or generate 30.28% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Pinnacle West Capital vs. Duke Energy
Performance |
| Timeline |
| Pinnacle West Capital |
| Duke Energy |
Pinnacle West and Duke Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Pinnacle West and Duke Energy
The main advantage of trading using opposite Pinnacle West and Duke Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Pinnacle West position performs unexpectedly, Duke 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 Duke Energy will offset losses from the drop in Duke Energy's long position.| Pinnacle West vs. CMS Energy | Pinnacle West vs. Ameren Corp | Pinnacle West vs. MGE Energy | Pinnacle West vs. Evergy, |
| Duke Energy vs. Dominion Energy | Duke Energy vs. Consolidated Edison | Duke Energy vs. Eversource Energy | Duke Energy vs. FirstEnergy |
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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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