Correlation Between Public Service and ONEOK

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

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

Diversification Opportunities for Public Service and ONEOK

0.77

Correlation Coefficient

Public Service  ONEOK

Poor diversification

The 3 months correlation between Public and ONEOK is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Public Service Enterprise and ONEOK Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ONEOK Inc and Public Service 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 Public Service Enterprise are associated (or correlated) with ONEOK. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ONEOK Inc has no effect on the direction of Public Service i.e., Public Service and ONEOK go up and down completely randomly.

Pair Corralation between Public Service and ONEOK

Assuming the 90 days trading horizon Public Service Enterprise is expected to under-perform the ONEOK. But the stock apears to be less risky and, when comparing its historical volatility, Public Service Enterprise is 1.07 times less risky than ONEOK. The stock trades about -0.02 of its potential returns per unit of risk. The ONEOK Inc is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  10,023  in ONEOK Inc on December 28, 2024 and sell it today you would lose (170.00) from holding ONEOK Inc or give up 1.7% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	96.72%
Values	Daily Returns

Public Service Enterprise  vs.  ONEOK Inc

Public Service Enterprise

Risk-Adjusted Performance

Very Weak

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

ONEOK Inc

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Public Service and ONEOK

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

The idea behind Public Service Enterprise and ONEOK Inc 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.