Correlation Between PGE Corp and Connecticut Light

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

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

Diversification Opportunities for PGE Corp and Connecticut Light

-0.33

Correlation Coefficient

PGE Corp  Connecticut Light

Very good diversification

The 3 months correlation between PGE and Connecticut is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding PGE Corp and The Connecticut Light in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Connecticut Light and PGE Corp 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 PGE Corp are associated (or correlated) with Connecticut Light. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Connecticut Light has no effect on the direction of PGE Corp i.e., PGE Corp and Connecticut Light go up and down completely randomly.

Pair Corralation between PGE Corp and Connecticut Light

Considering the 90-day investment horizon PGE Corp is expected to generate 0.91 times more return on investment than Connecticut Light. However, PGE Corp is 1.1 times less risky than Connecticut Light. It trades about 0.01 of its potential returns per unit of risk. The Connecticut Light is currently generating about -0.01 per unit of risk. If you would invest  1,976  in PGE Corp on September 13, 2024 and sell it today you would earn a total of  5.00  from holding PGE Corp or generate 0.25% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	96.83%
Values	Daily Returns

PGE Corp  vs.  The Connecticut Light

PGE Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days PGE Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable fundamental indicators, PGE Corp is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Connecticut Light

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days The Connecticut Light has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy technical indicators, Connecticut Light is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with PGE Corp and Connecticut Light

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

The idea behind PGE Corp and The Connecticut Light 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.