Correlation Between Genie Energy and Pacific Gas

Can any of the company-specific risk be diversified away by investing in both Genie 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 Genie 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 Genie Energy and Pacific Gas and, you can compare the effects of market volatilities on Genie 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 Genie Energy with a short position of Pacific Gas. Check out your portfolio center. Please also check ongoing floating volatility patterns of Genie Energy and Pacific Gas.

Diversification Opportunities for Genie Energy and Pacific Gas

-0.48

Correlation Coefficient

Genie Energy  Pacific Gas

Very good diversification

The 3 months correlation between Genie and Pacific is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding Genie 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 Genie 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 Genie 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 Genie Energy i.e., Genie Energy and Pacific Gas go up and down completely randomly.

Pair Corralation between Genie Energy and Pacific Gas

Considering the 90-day investment horizon Genie Energy is expected to under-perform the Pacific Gas. But the stock apears to be less risky and, when comparing its historical volatility, Genie Energy is 1.68 times less risky than Pacific Gas. The stock trades about -0.04 of its potential returns per unit of risk. The Pacific Gas and is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest  2,025  in Pacific Gas and on August 31, 2024 and sell it today you would lose (50.00) from holding Pacific Gas and or give up 2.47% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	36.51%
Values	Daily Returns

Genie Energy  vs.  Pacific Gas and

Genie Energy

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Genie Energy has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Genie Energy is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pacific Gas

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Pacific Gas and has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Pacific Gas is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Genie Energy and Pacific Gas

The main advantage of trading using opposite Genie Energy and Pacific Gas positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Genie 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 Genie 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.