Correlation Between Pinnacle West and Ferguson Plc

Can any of the company-specific risk be diversified away by investing in both Pinnacle West and Ferguson Plc 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 Pinnacle West and Ferguson Plc into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Pinnacle West Capital and Ferguson Plc, you can compare the effects of market volatilities on Pinnacle West and Ferguson Plc 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 Pinnacle West with a short position of Ferguson Plc. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pinnacle West and Ferguson Plc.

Diversification Opportunities for Pinnacle West and Ferguson Plc

0.72

Correlation Coefficient

Pinnacle West  Ferguson Plc

Poor diversification

The 3 months correlation between Pinnacle and Ferguson is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Pinnacle West Capital and Ferguson Plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ferguson Plc and Pinnacle West 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 Pinnacle West Capital are associated (or correlated) with Ferguson Plc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ferguson Plc has no effect on the direction of Pinnacle West i.e., Pinnacle West and Ferguson Plc go up and down completely randomly.

Pair Corralation between Pinnacle West and Ferguson Plc

Assuming the 90 days trading horizon Pinnacle West Capital is expected to generate 0.47 times more return on investment than Ferguson Plc. However, Pinnacle West Capital is 2.14 times less risky than Ferguson Plc. It trades about -0.14 of its potential returns per unit of risk. Ferguson Plc is currently generating about -0.15 per unit of risk. If you would invest  9,126  in Pinnacle West Capital on September 15, 2024 and sell it today you would lose (327.00) from holding Pinnacle West Capital or give up 3.58% of portfolio value over 90 days.

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

Pinnacle West Capital  vs.  Ferguson Plc

Pinnacle West Capital

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Pinnacle West Capital has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Pinnacle West is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Ferguson Plc

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Ferguson Plc are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Ferguson Plc is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Pinnacle West and Ferguson Plc

The main advantage of trading using opposite Pinnacle West and Ferguson Plc positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Pinnacle West position performs unexpectedly, Ferguson Plc 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 Ferguson Plc will offset losses from the drop in Ferguson Plc's long position.

The idea behind Pinnacle West Capital and Ferguson Plc 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.