Correlation Between MGE Energy and OGE Energy

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

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

Diversification Opportunities for MGE Energy and OGE Energy

0.76

Correlation Coefficient

MGE Energy  OGE Energy

Poor diversification

The 3 months correlation between MGE and OGE is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding MGE Energy and OGE Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on OGE Energy and MGE 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 MGE Energy 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 MGE Energy i.e., MGE Energy and OGE Energy go up and down completely randomly.

Pair Corralation between MGE Energy and OGE Energy

Given the investment horizon of 90 days MGE Energy is expected to under-perform the OGE Energy. In addition to that, MGE Energy is 1.33 times more volatile than OGE Energy. It trades about -0.27 of its total potential returns per unit of risk. OGE Energy is currently generating about 0.0 per unit of volatility. If you would invest  4,341  in OGE Energy on October 26, 2024 and sell it today you would lose (4.00) from holding OGE Energy or give up 0.09% of portfolio value over 90 days.

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

MGE Energy  vs.  OGE Energy

MGE Energy

Risk-Adjusted Performance

0 of 100

Very Weak

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

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 MGE Energy and OGE Energy

The main advantage of trading using opposite MGE Energy and OGE Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MGE Energy 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 MGE Energy 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.