Correlation Between MGE Energy and Portland General

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

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

Diversification Opportunities for MGE Energy and Portland General

0.87

Correlation Coefficient

MGE Energy  Portland General

Very poor diversification

The 3 months correlation between MGE and Portland is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding MGE Energy and Portland General Electric in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Portland General Electric 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 Portland General. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Portland General Electric has no effect on the direction of MGE Energy i.e., MGE Energy and Portland General go up and down completely randomly.

Pair Corralation between MGE Energy and Portland General

Given the investment horizon of 90 days MGE Energy is expected to under-perform the Portland General. In addition to that, MGE Energy is 1.34 times more volatile than Portland General Electric. It trades about -0.12 of its total potential returns per unit of risk. Portland General Electric is currently generating about -0.07 per unit of volatility. If you would invest  4,668  in Portland General Electric on December 1, 2024 and sell it today you would lose (258.00) from holding Portland General Electric or give up 5.53% of portfolio value over 90 days.

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

MGE Energy  vs.  Portland General Electric

MGE Energy

Risk-Adjusted Performance

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 uncertain performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Portland General Electric

Risk-Adjusted Performance

Very Weak

Over the last 90 days Portland General Electric has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Portland General is not utilizing all of its potentials. The recent stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with MGE Energy and Portland General

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

The idea behind MGE Energy and Portland General Electric 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.