Correlation Between Genie Energy and Pinnacle West

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

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

Diversification Opportunities for Genie Energy and Pinnacle West

-0.07

Correlation Coefficient

Genie Energy  Pinnacle West

Good diversification

The 3 months correlation between Genie and Pinnacle is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding Genie Energy and Pinnacle West Capital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pinnacle West Capital and Genie 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 Genie Energy are associated (or correlated) with Pinnacle West. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pinnacle West Capital has no effect on the direction of Genie Energy i.e., Genie Energy and Pinnacle West go up and down completely randomly.

Pair Corralation between Genie Energy and Pinnacle West

Considering the 90-day investment horizon Genie Energy is expected to generate 1.49 times more return on investment than Pinnacle West. However, Genie Energy is 1.49 times more volatile than Pinnacle West Capital. It trades about -0.18 of its potential returns per unit of risk. Pinnacle West Capital is currently generating about -0.28 per unit of risk. If you would invest  1,560  in Genie Energy on September 21, 2024 and sell it today you would lose (102.00) from holding Genie Energy or give up 6.54% of portfolio value over 90 days.

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

Genie Energy  vs.  Pinnacle West Capital

Genie Energy

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Genie Energy has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

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 fairly stable basic indicators, Pinnacle West is not utilizing all of its potentials. The current stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Genie Energy and Pinnacle West

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

The idea behind Genie Energy and Pinnacle West Capital 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.