Correlation Between PGE Corp and OGE Energy

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

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

Diversification Opportunities for PGE Corp and OGE Energy

0.72

Correlation Coefficient

PGE Corp  OGE Energy

Poor diversification

The 3 months correlation between PGE and OGE is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding PGE Corp and OGE Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on OGE Energy and PGE Corp 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 PGE Corp are associated (or correlated) with OGE Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of OGE Energy has no effect on the direction of PGE Corp i.e., PGE Corp and OGE Energy go up and down completely randomly.

Pair Corralation between PGE Corp and OGE Energy

Considering the 90-day investment horizon PGE Corp is expected to under-perform the OGE Energy. In addition to that, PGE Corp is 1.5 times more volatile than OGE Energy. It trades about -0.2 of its total potential returns per unit of risk. OGE Energy is currently generating about -0.3 per unit of volatility. If you would invest  4,381  in OGE Energy on September 22, 2024 and sell it today you would lose (285.00) from holding OGE Energy or give up 6.51% of portfolio value over 90 days.

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

PGE Corp  vs.  OGE Energy

PGE Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days PGE Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable fundamental indicators, PGE Corp is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

OGE Energy

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in OGE Energy are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, OGE Energy is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with PGE Corp and OGE Energy

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

The idea behind PGE Corp and OGE 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.

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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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.