Correlation Between Talen Energy and MGE Energy
Can any of the company-specific risk be diversified away by investing in both Talen Energy and MGE 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 Talen Energy and MGE Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Talen Energy and MGE Energy, you can compare the effects of market volatilities on Talen Energy and MGE 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 Talen Energy with a short position of MGE Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Talen Energy and MGE Energy.
Diversification Opportunities for Talen Energy and MGE Energy
0.88 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Talen and MGE is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Talen Energy and MGE Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MGE Energy and Talen Energy 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 Talen Energy are associated (or correlated) with MGE Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MGE Energy has no effect on the direction of Talen Energy i.e., Talen Energy and MGE Energy go up and down completely randomly.
Pair Corralation between Talen Energy and MGE Energy
Considering the 90-day investment horizon Talen Energy is expected to generate 1.78 times more return on investment than MGE Energy. However, Talen Energy is 1.78 times more volatile than MGE Energy. It trades about 0.26 of its potential returns per unit of risk. MGE Energy is currently generating about 0.32 per unit of risk. If you would invest 17,423 in Talen Energy on August 31, 2024 and sell it today you would earn a total of 3,982 from holding Talen Energy or generate 22.85% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Talen Energy vs. MGE Energy
Performance |
| Timeline |
| Talen Energy |
| MGE Energy |
Talen Energy and MGE Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Talen Energy and MGE Energy
The main advantage of trading using opposite Talen Energy and MGE Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Talen Energy position performs unexpectedly, MGE 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 MGE Energy will offset losses from the drop in MGE Energy's long position.| Talen Energy vs. Eastern Co | Talen Energy vs. Boyd Gaming | Talen Energy vs. The Cheesecake Factory | Talen Energy vs. Femasys |
| MGE Energy vs. CMS Energy | MGE Energy vs. Ameren Corp | MGE Energy vs. Pinnacle West Capital | MGE Energy vs. Evergy, |
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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.
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