Correlation Between PG E and TC Energy

Can any of the company-specific risk be diversified away by investing in both PG E and TC 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 TC 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 TC Energy, you can compare the effects of market volatilities on PG E and TC 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 TC Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of PG E and TC Energy.

Diversification Opportunities for PG E and TC Energy

0.91

Correlation Coefficient

PG E  TC Energy

Almost no diversification

The 3 months correlation between PCG6 and TRS is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding PG E P6 and TC Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TC 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 TC Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TC Energy has no effect on the direction of PG E i.e., PG E and TC Energy go up and down completely randomly.

Pair Corralation between PG E and TC Energy

Assuming the 90 days trading horizon PG E is expected to generate 1.27 times less return on investment than TC Energy. But when comparing it to its historical volatility, PG E P6 is 1.56 times less risky than TC Energy. It trades about 0.08 of its potential returns per unit of risk. TC Energy is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  4,071  in TC Energy on September 22, 2024 and sell it today you would earn a total of  278.00  from holding TC Energy or generate 6.83% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	98.48%
Values	Daily Returns

PG E P6  vs.  TC Energy

PG E P6

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in PG E P6 are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. 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.

TC Energy

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in TC Energy are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, TC Energy may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with PG E and TC Energy

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

The idea behind PG E P6 and TC 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.

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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 Equity Valuation module to check real value of public entities based on technical and fundamental data.