Correlation Between Red Electrica and PGE Corp

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

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

Diversification Opportunities for Red Electrica and PGE Corp

-0.21

Correlation Coefficient

Red Electrica  PGE Corp

Very good diversification

The 3 months correlation between Red and PGE is -0.21. Overlapping area represents the amount of risk that can be diversified away by holding Red Electrica Corporacion and PGE Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PGE Corp and Red Electrica 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 Red Electrica Corporacion are associated (or correlated) with PGE Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PGE Corp has no effect on the direction of Red Electrica i.e., Red Electrica and PGE Corp go up and down completely randomly.

Pair Corralation between Red Electrica and PGE Corp

If you would invest  15,684  in PGE Corp on September 12, 2024 and sell it today you would earn a total of  0.00  from holding PGE Corp or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	1.59%
Values	Daily Returns

Red Electrica Corporacion  vs.  PGE Corp

Red Electrica Corporacion

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Red Electrica Corporacion has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's forward indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

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. In spite of comparatively stable technical and fundamental indicators, PGE Corp is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Red Electrica and PGE Corp

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

The idea behind Red Electrica Corporacion and PGE Corp 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.