Correlation Between PNM Old and MGE Energy

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

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

Diversification Opportunities for PNM Old and MGE Energy

0.0

Correlation Coefficient

PNM Old  MGE Energy

Pay attention - limited upside

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

Pair Corralation between PNM Old and MGE Energy

If you would invest (100.00) in PNM Old on December 25, 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.  MGE Energy

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.

MGE Energy

Risk-Adjusted Performance

Very Weak

Over the last 90 days MGE Energy has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, MGE Energy is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with PNM Old and MGE Energy

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

The idea behind PNM Old and MGE 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.