Correlation Between Portland General and Entergy

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

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

Diversification Opportunities for Portland General and Entergy

-0.45

Correlation Coefficient

Portland General  Entergy

Very good diversification

The 3 months correlation between Portland and Entergy is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding Portland General Electric and Entergy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Entergy and Portland General 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 Portland General Electric are associated (or correlated) with Entergy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Entergy has no effect on the direction of Portland General i.e., Portland General and Entergy go up and down completely randomly.

Pair Corralation between Portland General and Entergy

Considering the 90-day investment horizon Portland General Electric is expected to under-perform the Entergy. But the stock apears to be less risky and, when comparing its historical volatility, Portland General Electric is 1.22 times less risky than Entergy. The stock trades about -0.28 of its potential returns per unit of risk. The Entergy is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  7,397  in Entergy on October 11, 2024 and sell it today you would earn a total of  263.00  from holding Entergy or generate 3.56% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Portland General Electric  vs.  Entergy

Portland General Electric

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Portland General Electric has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest unfluctuating performance, the Stock's basic indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

Entergy

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Entergy are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Even with relatively uncertain basic indicators, Entergy reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Portland General and Entergy

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

The idea behind Portland General Electric and Entergy 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.