Correlation Between PPL and Public Service
Can any of the company-specific risk be diversified away by investing in both PPL and Public Service 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 PPL and Public Service into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between PPL Corporation and Public Service Enterprise, you can compare the effects of market volatilities on PPL and Public Service 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 PPL with a short position of Public Service. Check out your portfolio center. Please also check ongoing floating volatility patterns of PPL and Public Service.
Diversification Opportunities for PPL and Public Service
0.62 | Correlation Coefficient |
Poor diversification
The 3 months correlation between PPL and Public is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding PPL Corp. and Public Service Enterprise in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Public Service Enterprise and PPL 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 PPL Corporation are associated (or correlated) with Public Service. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Public Service Enterprise has no effect on the direction of PPL i.e., PPL and Public Service go up and down completely randomly.
Pair Corralation between PPL and Public Service
Considering the 90-day investment horizon PPL Corporation is expected to generate 0.65 times more return on investment than Public Service. However, PPL Corporation is 1.54 times less risky than Public Service. It trades about 0.2 of its potential returns per unit of risk. Public Service Enterprise is currently generating about 0.06 per unit of risk. If you would invest 3,271 in PPL Corporation on August 27, 2024 and sell it today you would earn a total of 174.00 from holding PPL Corporation or generate 5.32% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
PPL Corp. vs. Public Service Enterprise
Performance |
| Timeline |
| PPL Corporation |
| Public Service Enterprise |
PPL and Public Service Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with PPL and Public Service
The main advantage of trading using opposite PPL and Public Service positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PPL position performs unexpectedly, Public Service 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 Public Service will offset losses from the drop in Public Service's long position.The idea behind PPL Corporation and Public Service Enterprise pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| Public Service vs. CenterPoint Energy | Public Service vs. FirstEnergy | Public Service vs. Pinnacle West Capital | Public Service vs. Edison 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.
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