Correlation Between Public Service and PGE Corp

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Can any of the company-specific risk be diversified away by investing in both Public Service and PGE Corp 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 Public Service and PGE Corp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Public Service Enterprise and PGE Corp, you can compare the effects of market volatilities on Public Service and PGE Corp 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 Public Service with a short position of PGE Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Public Service and PGE Corp.

Diversification Opportunities for Public Service and PGE Corp

0.09
  Correlation Coefficient

Significant diversification

The 3 months correlation between Public and PGE is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding Public Service Enterprise and PGE Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PGE Corp and Public Service 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 Public Service Enterprise are associated (or correlated) with PGE Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PGE Corp has no effect on the direction of Public Service i.e., Public Service and PGE Corp go up and down completely randomly.

Pair Corralation between Public Service and PGE Corp

Considering the 90-day investment horizon Public Service Enterprise is expected to generate 0.88 times more return on investment than PGE Corp. However, Public Service Enterprise is 1.13 times less risky than PGE Corp. It trades about 0.15 of its potential returns per unit of risk. PGE Corp is currently generating about -0.09 per unit of risk. If you would invest  6,058  in Public Service Enterprise on December 29, 2023 and sell it today you would earn a total of  620.00  from holding Public Service Enterprise or generate 10.23% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Public Service Enterprise  vs.  PGE Corp

 Performance 
       Timeline  
Public Service Enterprise 

Risk-Adjusted Performance

11 of 100

 
Low
 
High
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Public Service Enterprise are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak technical and fundamental indicators, Public Service may actually be approaching a critical reversion point that can send shares even higher in April 2024.
PGE Corp 

Risk-Adjusted Performance

0 of 100

 
Low
 
High
Very Weak
Over the last 90 days PGE Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unsteady performance, the Stock's fundamental indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Public Service and PGE Corp Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Public Service and PGE Corp

The main advantage of trading using opposite Public Service and PGE Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Public Service position performs unexpectedly, PGE Corp 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 PGE Corp will offset losses from the drop in PGE Corp's long position.
The idea behind Public Service Enterprise and PGE Corp 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.
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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.

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