Correlation Between Public Service and PPL
Can any of the company-specific risk be diversified away by investing in both Public Service and PPL 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 PPL 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 PPL Corporation, you can compare the effects of market volatilities on Public Service and PPL 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 PPL. Check out your portfolio center. Please also check ongoing floating volatility patterns of Public Service and PPL.
Diversification Opportunities for Public Service and PPL
0.87 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Public and PPL is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Public Service Enterprise and PPL Corp. in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PPL Corporation 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 PPL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PPL Corporation has no effect on the direction of Public Service i.e., Public Service and PPL go up and down completely randomly.
Pair Corralation between Public Service and PPL
Considering the 90-day investment horizon Public Service Enterprise is expected to generate 1.05 times more return on investment than PPL. However, Public Service is 1.05 times more volatile than PPL Corporation. It trades about 0.01 of its potential returns per unit of risk. PPL Corporation is currently generating about 0.01 per unit of risk. If you would invest 6,483 in Public Service Enterprise on January 19, 2024 and sell it today you would earn a total of 20.00 from holding Public Service Enterprise or generate 0.31% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Strong |
Accuracy | 100.0% |
Values | Daily Returns |
Public Service Enterprise vs. PPL Corp.
Performance |
Timeline |
Public Service Enterprise |
PPL Corporation |
Public Service and PPL Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Public Service and PPL
The main advantage of trading using opposite Public Service and PPL positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Public Service position performs unexpectedly, PPL 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 PPL will offset losses from the drop in PPL's long position.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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
Other Complementary Tools
CEOs Directory Screen CEOs from public companies around the world | |
Pair Correlation Compare performance and examine fundamental relationship between any two equity instruments | |
Portfolio Comparator Compare the composition, asset allocations and performance of any two portfolios in your account | |
USA ETFs Find actively traded Exchange Traded Funds (ETF) in USA | |
Global Markets Map Get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes | |
Global Correlations Find global opportunities by holding instruments from different markets | |
Instant Ratings Determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance |