Correlation Between PGE Corp and Pacific Gas

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

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

Diversification Opportunities for PGE Corp and Pacific Gas

-0.07

Correlation Coefficient

PGE Corp  Pacific Gas

Good diversification

The 3 months correlation between PGE and Pacific is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding PGE Corp and Pacific Gas and in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pacific Gas and PGE Corp 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 PGE Corp 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 PGE Corp i.e., PGE Corp and Pacific Gas go up and down completely randomly.

Pair Corralation between PGE Corp and Pacific Gas

Considering the 90-day investment horizon PGE Corp is expected to generate 0.54 times more return on investment than Pacific Gas. However, PGE Corp is 1.86 times less risky than Pacific Gas. It trades about 0.13 of its potential returns per unit of risk. Pacific Gas and is currently generating about -0.01 per unit of risk. If you would invest  1,993  in PGE Corp on September 2, 2024 and sell it today you would earn a total of  170.00  from holding PGE Corp or generate 8.53% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	93.75%
Values	Daily Returns

PGE Corp  vs.  Pacific Gas and

PGE Corp

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in PGE Corp are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady fundamental indicators, PGE Corp may actually be approaching a critical reversion point that can send shares even higher in January 2025.

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 latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with PGE Corp and Pacific Gas

The main advantage of trading using opposite PGE Corp and Pacific Gas positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PGE Corp 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 PGE Corp 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..