Correlation Between PGE Corp and Public Service

Can any of the company-specific risk be diversified away by investing in both PGE Corp 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 PGE Corp and Public Service into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between PGE Corp and Public Service Enterprise, you can compare the effects of market volatilities on PGE Corp 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 PGE Corp with a short position of Public Service. Check out your portfolio center. Please also check ongoing floating volatility patterns of PGE Corp and Public Service.

Diversification Opportunities for PGE Corp and Public Service

-0.13

Correlation Coefficient

PGE Corp  Public Service

Good diversification

The 3 months correlation between PGE and Public is -0.13. Overlapping area represents the amount of risk that can be diversified away by holding PGE 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 PGE Corp 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 PGE Corp 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 PGE Corp i.e., PGE Corp and Public Service go up and down completely randomly.

Pair Corralation between PGE Corp and Public Service

Considering the 90-day investment horizon PGE Corp is expected to under-perform the Public Service. In addition to that, PGE Corp is 1.13 times more volatile than Public Service Enterprise. It trades about -0.01 of its total potential returns per unit of risk. Public Service Enterprise is currently generating about 0.04 per unit of volatility. If you would invest  6,143  in Public Service Enterprise on January 24, 2024 and sell it today you would earn a total of  528.00  from holding Public Service Enterprise or generate 8.6% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

PGE Corp  vs.  Public Service Enterprise

PGE Corp

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in PGE Corp are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable fundamental indicators, PGE Corp is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Public Service Enterprise

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Public Service Enterprise are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain technical and fundamental indicators, Public Service reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with PGE Corp and Public Service

The main advantage of trading using opposite PGE Corp and Public Service positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PGE Corp 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 PGE Corp 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.

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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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.