Correlation Between Portland General and Pinnacle West

Can any of the company-specific risk be diversified away by investing in both Portland General and Pinnacle West 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 Pinnacle West 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 Pinnacle West Capital, you can compare the effects of market volatilities on Portland General and Pinnacle West 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 Pinnacle West. Check out your portfolio center. Please also check ongoing floating volatility patterns of Portland General and Pinnacle West.

Diversification Opportunities for Portland General and Pinnacle West

0.63

Correlation Coefficient

Portland General  Pinnacle West

Poor diversification

The 3 months correlation between Portland and Pinnacle is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Portland General Electric and Pinnacle West Capital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pinnacle West Capital 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 Pinnacle West. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pinnacle West Capital has no effect on the direction of Portland General i.e., Portland General and Pinnacle West go up and down completely randomly.

Pair Corralation between Portland General and Pinnacle West

Considering the 90-day investment horizon Portland General Electric is expected to under-perform the Pinnacle West. In addition to that, Portland General is 1.18 times more volatile than Pinnacle West Capital. It trades about 0.0 of its total potential returns per unit of risk. Pinnacle West Capital is currently generating about 0.14 per unit of volatility. If you would invest  8,456  in Pinnacle West Capital on December 26, 2024 and sell it today you would earn a total of  839.00  from holding Pinnacle West Capital or generate 9.92% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Portland General Electric  vs.  Pinnacle West Capital

Portland General Electric

Risk-Adjusted Performance

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 relatively invariable basic indicators, Portland General is not utilizing all of its potentials. The recent stock price agitation, may contribute to short-term losses for the retail investors.

Pinnacle West Capital

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Pinnacle West Capital are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of fairly uncertain basic indicators, Pinnacle West may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Portland General and Pinnacle West

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

The idea behind Portland General Electric and Pinnacle West Capital 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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.