Correlation Between Pinnacle West and Portland General
Can any of the company-specific risk be diversified away by investing in both Pinnacle West and Portland General 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 Portland General 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 Portland General Electric, you can compare the effects of market volatilities on Pinnacle West and Portland General 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 Portland General. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pinnacle West and Portland General.
Diversification Opportunities for Pinnacle West and Portland General
0.75 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Pinnacle and Portland is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Pinnacle West Capital and Portland General Electric in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Portland General Electric 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 Portland General. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Portland General Electric has no effect on the direction of Pinnacle West i.e., Pinnacle West and Portland General go up and down completely randomly.
Pair Corralation between Pinnacle West and Portland General
Considering the 90-day investment horizon Pinnacle West Capital is expected to generate 1.0 times more return on investment than Portland General. However, Pinnacle West is 1.0 times more volatile than Portland General Electric. It trades about 0.1 of its potential returns per unit of risk. Portland General Electric is currently generating about 0.02 per unit of risk. If you would invest 6,608 in Pinnacle West Capital on November 9, 2024 and sell it today you would earn a total of 2,167 from holding Pinnacle West Capital or generate 32.79% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Pinnacle West Capital vs. Portland General Electric
Performance |
| Timeline |
| Pinnacle West Capital |
| Portland General Electric |
Pinnacle West and Portland General Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Pinnacle West and Portland General
The main advantage of trading using opposite Pinnacle West and Portland General positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Pinnacle West position performs unexpectedly, Portland General 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 Portland General will offset losses from the drop in Portland General's long position.| Pinnacle West vs. CMS Energy | Pinnacle West vs. Ameren Corp | Pinnacle West vs. MGE Energy | Pinnacle West vs. Evergy, |
| Portland General vs. MGE Energy | Portland General vs. CMS Energy | Portland General vs. OGE Energy | Portland General vs. DTE Energy |
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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.
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