Correlation Between Gevo and Entergy

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

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

Diversification Opportunities for Gevo and Entergy

-0.39

Correlation Coefficient

Gevo  Entergy

Very good diversification

The 3 months correlation between Gevo and Entergy is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding Gevo Inc and Entergy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Entergy and Gevo 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 Gevo Inc 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 Gevo i.e., Gevo and Entergy go up and down completely randomly.

Pair Corralation between Gevo and Entergy

Assuming the 90 days trading horizon Gevo Inc is expected to generate 13.44 times more return on investment than Entergy. However, Gevo is 13.44 times more volatile than Entergy. It trades about 0.35 of its potential returns per unit of risk. Entergy is currently generating about 0.15 per unit of risk. If you would invest  146.00  in Gevo Inc on October 8, 2024 and sell it today you would earn a total of  112.00  from holding Gevo Inc or generate 76.71% return on investment over 90 days.

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

Gevo Inc  vs.  Entergy

Gevo Inc

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Gevo Inc are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, Gevo reported solid returns over the last few months and may actually be approaching a breakup point.

Entergy

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Entergy are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Entergy reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Gevo and Entergy

The main advantage of trading using opposite Gevo and Entergy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Gevo 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 Gevo Inc 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.

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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.