Correlation Between PNM Old and Entergy Texas

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

By analyzing existing cross correlation between PNM Old and Entergy Texas, you can compare the effects of market volatilities on PNM Old and Entergy Texas 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 Entergy Texas. Check out your portfolio center. Please also check ongoing floating volatility patterns of PNM Old and Entergy Texas.

Diversification Opportunities for PNM Old and Entergy Texas

0.0

Correlation Coefficient

PNM Old  Entergy Texas

Pay attention - limited upside

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

Pair Corralation between PNM Old and Entergy Texas

If you would invest  2,304  in Entergy Texas on December 27, 2024 and sell it today you would earn a total of  134.00  from holding Entergy Texas or generate 5.82% return on investment over 90 days.

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

PNM Old  vs.  Entergy Texas

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.

Entergy Texas

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Entergy Texas are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable basic indicators, Entergy Texas is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with PNM Old and Entergy Texas

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

The idea behind PNM Old and Entergy Texas 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.