Correlation Between Duke Energy and Pacific Gas

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

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

Diversification Opportunities for Duke Energy and Pacific Gas

0.0

Correlation Coefficient

Duke Energy  Pacific Gas

Pay attention - limited upside

The 3 months correlation between Duke and Pacific is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Duke Energy and Pacific Gas and in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pacific Gas and Duke 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 Duke Energy 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 has no effect on the direction of Duke Energy i.e., Duke Energy and Pacific Gas go up and down completely randomly.

Pair Corralation between Duke Energy and Pacific Gas

Assuming the 90 days trading horizon Duke Energy is expected to generate 2.12 times less return on investment than Pacific Gas. But when comparing it to its historical volatility, Duke Energy is 3.31 times less risky than Pacific Gas. It trades about 0.03 of its potential returns per unit of risk. Pacific Gas and is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  2,182  in Pacific Gas and on August 31, 2024 and sell it today you would earn a total of  18.00  from holding Pacific Gas and or generate 0.82% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	96.88%
Values	Daily Returns

Duke Energy  vs.  Pacific Gas and

Duke Energy

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Duke Energy are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong forward-looking signals, Duke Energy is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pacific Gas

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Pacific Gas and are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong technical and fundamental indicators, Pacific Gas is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Duke Energy and Pacific Gas

The main advantage of trading using opposite Duke Energy and Pacific Gas positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Duke Energy 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 Duke Energy and Pacific Gas and 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.