Correlation Between AMCON Distributing and Pacific Gas

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

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

Diversification Opportunities for AMCON Distributing and Pacific Gas

-0.59

Correlation Coefficient

AMCON Distributing  Pacific Gas

Excellent diversification

The 3 months correlation between AMCON and Pacific is -0.59. Overlapping area represents the amount of risk that can be diversified away by holding AMCON Distributing and Pacific Gas Electric in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pacific Gas Electric and AMCON Distributing 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 AMCON Distributing are associated (or correlated) with Pacific Gas. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pacific Gas Electric has no effect on the direction of AMCON Distributing i.e., AMCON Distributing and Pacific Gas go up and down completely randomly.

Pair Corralation between AMCON Distributing and Pacific Gas

Considering the 90-day investment horizon AMCON Distributing is expected to under-perform the Pacific Gas. But the stock apears to be less risky and, when comparing its historical volatility, AMCON Distributing is 1.6 times less risky than Pacific Gas. The stock trades about -0.03 of its potential returns per unit of risk. The Pacific Gas Electric is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  2,000  in Pacific Gas Electric on September 28, 2024 and sell it today you would lose (42.00) from holding Pacific Gas Electric or give up 2.1% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	66.67%
Values	Daily Returns

AMCON Distributing  vs.  Pacific Gas Electric

AMCON Distributing

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pacific Gas Electric

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Pacific Gas Electric has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Preferred Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with AMCON Distributing and Pacific Gas

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

The idea behind AMCON Distributing and Pacific Gas Electric 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.