Correlation Between OGE Energy and IDACORP

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

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

Diversification Opportunities for OGE Energy and IDACORP

0.93

Correlation Coefficient

OGE Energy  IDACORP

Almost no diversification

The 3 months correlation between OGE and IDACORP is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding OGE Energy and IDACORP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IDACORP and OGE 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 OGE Energy are associated (or correlated) with IDACORP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of IDACORP has no effect on the direction of OGE Energy i.e., OGE Energy and IDACORP go up and down completely randomly.

Pair Corralation between OGE Energy and IDACORP

Considering the 90-day investment horizon OGE Energy is expected to generate 1.32 times less return on investment than IDACORP. In addition to that, OGE Energy is 1.07 times more volatile than IDACORP. It trades about 0.17 of its total potential returns per unit of risk. IDACORP is currently generating about 0.24 per unit of volatility. If you would invest  10,199  in IDACORP on September 2, 2024 and sell it today you would earn a total of  1,648  from holding IDACORP or generate 16.16% return on investment over 90 days.

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

OGE Energy  vs.  IDACORP

OGE Energy

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in OGE Energy are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical and fundamental indicators, OGE Energy may actually be approaching a critical reversion point that can send shares even higher in January 2025.

IDACORP

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in IDACORP are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain fundamental indicators, IDACORP sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with OGE Energy and IDACORP

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

The idea behind OGE Energy and IDACORP 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.