Correlation Between Eversource Energy and Pacific Gas

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

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

Diversification Opportunities for Eversource Energy and Pacific Gas

-0.17

Correlation Coefficient

Eversource Energy  Pacific Gas

Good diversification

The 3 months correlation between Eversource and Pacific is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding Eversource Energy and Pacific Gas and in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pacific Gas and Eversource Energy 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 Eversource Energy are associated (or correlated) with Pacific Gas. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pacific Gas has no effect on the direction of Eversource Energy i.e., Eversource Energy and Pacific Gas go up and down completely randomly.

Pair Corralation between Eversource Energy and Pacific Gas

Allowing for the 90-day total investment horizon Eversource Energy is expected to under-perform the Pacific Gas. But the stock apears to be less risky and, when comparing its historical volatility, Eversource Energy is 1.39 times less risky than Pacific Gas. The stock trades about -0.01 of its potential returns per unit of risk. The Pacific Gas and is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  1,666  in Pacific Gas and on February 28, 2024 and sell it today you would earn a total of  32.00  from holding Pacific Gas and or generate 1.92% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	88.1%
Values	Daily Returns

Eversource Energy  vs.  Pacific Gas and

Eversource Energy

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Eversource Energy are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Eversource Energy is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pacific Gas

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Pacific Gas and has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong technical and fundamental indicators, Pacific Gas is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Eversource Energy and Pacific Gas

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

The idea behind Eversource Energy and Pacific Gas and 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.