Correlation Between Pinnacle West and Entergy Texas
Can any of the company-specific risk be diversified away by investing in both Pinnacle West and Entergy Texas 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 Entergy Texas 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 Entergy Texas, you can compare the effects of market volatilities on Pinnacle West and Entergy Texas 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 Entergy Texas. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pinnacle West and Entergy Texas.
Diversification Opportunities for Pinnacle West and Entergy Texas
0.25 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Pinnacle and Entergy is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Pinnacle West Capital and Entergy Texas in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Entergy Texas 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 Entergy Texas. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Entergy Texas has no effect on the direction of Pinnacle West i.e., Pinnacle West and Entergy Texas go up and down completely randomly.
Pair Corralation between Pinnacle West and Entergy Texas
Considering the 90-day investment horizon Pinnacle West Capital is expected to generate 1.95 times more return on investment than Entergy Texas. However, Pinnacle West is 1.95 times more volatile than Entergy Texas. It trades about 0.22 of its potential returns per unit of risk. Entergy Texas is currently generating about 0.12 per unit of risk. If you would invest 8,731 in Pinnacle West Capital on August 28, 2024 and sell it today you would earn a total of 557.00 from holding Pinnacle West Capital or generate 6.38% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Pinnacle West Capital vs. Entergy Texas
Performance |
| Timeline |
| Pinnacle West Capital |
| Entergy Texas |
Pinnacle West and Entergy Texas Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Pinnacle West and Entergy Texas
The main advantage of trading using opposite Pinnacle West and Entergy Texas positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Pinnacle West position performs unexpectedly, Entergy Texas 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 Entergy Texas will offset losses from the drop in Entergy Texas' long position.| Pinnacle West vs. CMS Energy | Pinnacle West vs. Ameren Corp | Pinnacle West vs. MGE Energy | Pinnacle West vs. Evergy, |
| Entergy Texas vs. Duke Energy | Entergy Texas vs. Spire Inc | Entergy Texas vs. CMS Energy | Entergy Texas vs. Aquagold International |
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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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