Correlation Between PG E and Gear Energy

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

By analyzing existing cross correlation between PG E P6 and Gear Energy, you can compare the effects of market volatilities on PG E and Gear 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 PG E with a short position of Gear Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of PG E and Gear Energy.

Diversification Opportunities for PG E and Gear Energy

0.0

Correlation Coefficient

PG E  Gear Energy

Pay attention - limited upside

The 3 months correlation between PCG6 and Gear is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding PG E P6 and Gear Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gear Energy and PG E 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 PG E P6 are associated (or correlated) with Gear Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gear Energy has no effect on the direction of PG E i.e., PG E and Gear Energy go up and down completely randomly.

Pair Corralation between PG E and Gear Energy

If you would invest (100.00) in PG E P6 on October 1, 2024 and sell it today you would earn a total of  100.00  from holding PG E P6 or generate -100.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

PG E P6  vs.  Gear Energy

PG E P6

Risk-Adjusted Performance

0 of 100

Modest

Over the last 90 days PG E P6 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical and fundamental indicators, PG E is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Gear Energy

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Gear Energy has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with PG E and Gear Energy

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

The idea behind PG E P6 and Gear 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.

Check out your portfolio center.

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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.