Correlation Between PGE Corp and Transportadora

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

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

Diversification Opportunities for PGE Corp and Transportadora

0.77

Correlation Coefficient

PGE Corp  Transportadora

Poor diversification

The 3 months correlation between PGE and Transportadora is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding PGE Corp and Transportadora de Gas in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Transportadora de 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 Transportadora. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Transportadora de Gas has no effect on the direction of PGE Corp i.e., PGE Corp and Transportadora go up and down completely randomly.

Pair Corralation between PGE Corp and Transportadora

Considering the 90-day investment horizon PGE Corp is expected to generate 21.16 times less return on investment than Transportadora. But when comparing it to its historical volatility, PGE Corp is 2.23 times less risky than Transportadora. It trades about 0.02 of its potential returns per unit of risk. Transportadora de Gas is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest  2,096  in Transportadora de Gas on September 12, 2024 and sell it today you would earn a total of  759.00  from holding Transportadora de Gas or generate 36.21% return on investment over 90 days.

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

PGE Corp  vs.  Transportadora de Gas

PGE Corp

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in PGE Corp are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable fundamental indicators, PGE Corp is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Transportadora de Gas

Risk-Adjusted Performance

15 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Transportadora de Gas are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak technical and fundamental indicators, Transportadora unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with PGE Corp and Transportadora

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

The idea behind PGE Corp and Transportadora de Gas 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.