Correlation Between PNM Old and Central Puerto

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

By analyzing existing cross correlation between PNM Old and Central Puerto SA, you can compare the effects of market volatilities on PNM Old and Central Puerto 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 PNM Old with a short position of Central Puerto. Check out your portfolio center. Please also check ongoing floating volatility patterns of PNM Old and Central Puerto.

Diversification Opportunities for PNM Old and Central Puerto

0.0

Correlation Coefficient

PNM Old  Central Puerto

Pay attention - limited upside

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

Pair Corralation between PNM Old and Central Puerto

If you would invest (100.00) in PNM Old on November 29, 2024 and sell it today you would earn a total of  100.00  from holding PNM Old 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

PNM Old  vs.  Central Puerto SA

PNM Old

Risk-Adjusted Performance

Very Weak

Over the last 90 days PNM Old has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, PNM Old is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Central Puerto SA

Risk-Adjusted Performance

Very Weak

Over the last 90 days Central Puerto SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with PNM Old and Central Puerto

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

The idea behind PNM Old and Central Puerto SA 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.