Correlation Between PGE Corp and Red Electrica

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

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

Diversification Opportunities for PGE Corp and Red Electrica

0.0

Correlation Coefficient

PGE Corp  Red Electrica

Pay attention - limited upside

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

Pair Corralation between PGE Corp and Red Electrica

If you would invest  852.00  in Red Electrica Corporacion on December 27, 2024 and sell it today you would earn a total of  113.00  from holding Red Electrica Corporacion or generate 13.26% return on investment over 90 days.

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

PGE Corp  vs.  Red Electrica Corporacion

PGE Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days PGE Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable technical and fundamental indicators, PGE Corp is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Red Electrica Corporacion

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Red Electrica Corporacion are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak forward indicators, Red Electrica showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with PGE Corp and Red Electrica

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

The idea behind PGE Corp and Red Electrica Corporacion 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.