Correlation Between Duke Energy and IDACORP

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

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

Diversification Opportunities for Duke Energy and IDACORP

-0.22

Correlation Coefficient

Duke Energy  IDACORP

Very good diversification

The 3 months correlation between Duke and IDACORP is -0.22. Overlapping area represents the amount of risk that can be diversified away by holding Duke Energy and IDACORP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IDACORP 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 IDACORP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of IDACORP has no effect on the direction of Duke Energy i.e., Duke Energy and IDACORP go up and down completely randomly.

Pair Corralation between Duke Energy and IDACORP

Considering the 90-day investment horizon Duke Energy is expected to generate 1.27 times more return on investment than IDACORP. However, Duke Energy is 1.27 times more volatile than IDACORP. It trades about -0.26 of its potential returns per unit of risk. IDACORP is currently generating about -0.53 per unit of risk. If you would invest  11,470  in Duke Energy on September 23, 2024 and sell it today you would lose (642.00) from holding Duke Energy or give up 5.6% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Duke Energy  vs.  IDACORP

Duke Energy

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Duke Energy has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unsteady performance, the Stock's basic indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

IDACORP

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in IDACORP are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong fundamental indicators, IDACORP is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Duke Energy and IDACORP

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

The idea behind Duke Energy and IDACORP 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 Global Correlations module to find global opportunities by holding instruments from different markets.