Correlation Between Portland General and Golden Energy

Can any of the company-specific risk be diversified away by investing in both Portland General and Golden 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 Portland General and Golden Energy 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 Golden Energy Offshore, you can compare the effects of market volatilities on Portland General and Golden 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 Portland General with a short position of Golden Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Portland General and Golden Energy.

Diversification Opportunities for Portland General and Golden Energy

0.87

Correlation Coefficient

Portland General  Golden Energy

Very poor diversification

The 3 months correlation between Portland and Golden is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Portland General Electric and Golden Energy Offshore in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Golden Energy Offshore 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 Golden Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Golden Energy Offshore has no effect on the direction of Portland General i.e., Portland General and Golden Energy go up and down completely randomly.

Pair Corralation between Portland General and Golden Energy

Considering the 90-day investment horizon Portland General is expected to generate 1.97 times less return on investment than Golden Energy. But when comparing it to its historical volatility, Portland General Electric is 4.28 times less risky than Golden Energy. It trades about 0.39 of its potential returns per unit of risk. Golden Energy Offshore is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  14.00  in Golden Energy Offshore on February 15, 2024 and sell it today you would earn a total of  2.50  from holding Golden Energy Offshore or generate 17.86% return on investment over 90 days.

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

Portland General Electric  vs.  Golden Energy Offshore

Portland General Electric

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Portland General Electric are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Portland General may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Golden Energy Offshore

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Golden Energy Offshore are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Golden Energy reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Portland General and Golden Energy

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

The idea behind Portland General Electric and Golden Energy Offshore 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.