Correlation Between National Rural and Pacific Gas

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

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

Diversification Opportunities for National Rural and Pacific Gas

-0.69

Correlation Coefficient

National Rural  Pacific Gas

Excellent diversification

The 3 months correlation between National and Pacific is -0.69. Overlapping area represents the amount of risk that can be diversified away by holding National Rural Utilities and Pacific Gas and in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pacific Gas and National Rural 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 National Rural Utilities 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 National Rural i.e., National Rural and Pacific Gas go up and down completely randomly.

Pair Corralation between National Rural and Pacific Gas

Given the investment horizon of 90 days National Rural Utilities is expected to generate 0.34 times more return on investment than Pacific Gas. However, National Rural Utilities is 2.91 times less risky than Pacific Gas. It trades about -0.11 of its potential returns per unit of risk. Pacific Gas and is currently generating about -0.08 per unit of risk. If you would invest  2,488  in National Rural Utilities on October 10, 2024 and sell it today you would lose (143.00) from holding National Rural Utilities or give up 5.75% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	36.07%
Values	Daily Returns

National Rural Utilities  vs.  Pacific Gas and

National Rural Utilities

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days National Rural Utilities has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, National Rural 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. Despite latest inconsistent performance, the Preferred Stock's technical and fundamental indicators remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the firm traders.

Pair Trading with National Rural and Pacific Gas

The main advantage of trading using opposite National Rural and Pacific Gas positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if National Rural 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 National Rural Utilities 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.