Correlation Between Entergy and OGE Energy

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

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

Diversification Opportunities for Entergy and OGE Energy

0.56

Correlation Coefficient

Entergy  OGE Energy

Very weak diversification

The 3 months correlation between Entergy and OGE is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding Entergy and OGE Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on OGE Energy and Entergy 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 Entergy are associated (or correlated) with OGE Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of OGE Energy has no effect on the direction of Entergy i.e., Entergy and OGE Energy go up and down completely randomly.

Pair Corralation between Entergy and OGE Energy

Considering the 90-day investment horizon Entergy is expected to generate 1.76 times more return on investment than OGE Energy. However, Entergy is 1.76 times more volatile than OGE Energy. It trades about 0.16 of its potential returns per unit of risk. OGE Energy is currently generating about 0.09 per unit of risk. If you would invest  6,706  in Entergy on October 26, 2024 and sell it today you would earn a total of  1,546  from holding Entergy or generate 23.05% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.33%
Values	Daily Returns

Entergy  vs.  OGE Energy

Entergy

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Entergy are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Even with relatively uncertain basic indicators, Entergy reported solid returns over the last few months and may actually be approaching a breakup point.

OGE Energy

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in OGE Energy are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical and fundamental indicators, OGE Energy may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Entergy and OGE Energy

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

The idea behind Entergy and OGE Energy 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.