Correlation Between OGE Energy and PPL
Can any of the company-specific risk be diversified away by investing in both OGE Energy and PPL 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 OGE Energy and PPL into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between OGE Energy and PPL Corporation, you can compare the effects of market volatilities on OGE Energy and PPL 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 OGE Energy with a short position of PPL. Check out your portfolio center. Please also check ongoing floating volatility patterns of OGE Energy and PPL.
Diversification Opportunities for OGE Energy and PPL
0.9 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between OGE and PPL is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding OGE Energy and PPL Corp. in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PPL Corporation and OGE 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 OGE Energy are associated (or correlated) with PPL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PPL Corporation has no effect on the direction of OGE Energy i.e., OGE Energy and PPL go up and down completely randomly.
Pair Corralation between OGE Energy and PPL
Considering the 90-day investment horizon OGE Energy is expected to generate 0.95 times more return on investment than PPL. However, OGE Energy is 1.05 times less risky than PPL. It trades about 0.03 of its potential returns per unit of risk. PPL Corporation is currently generating about -0.08 per unit of risk. If you would invest 4,356 in OGE Energy on March 11, 2025 and sell it today you would earn a total of 21.00 from holding OGE Energy or generate 0.48% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
OGE Energy vs. PPL Corp.
Performance |
| Timeline |
| OGE Energy |
| PPL Corporation |
OGE Energy and PPL Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with OGE Energy and PPL
The main advantage of trading using opposite OGE Energy and PPL positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if OGE Energy position performs unexpectedly, PPL 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 PPL will offset losses from the drop in PPL's long position.| OGE Energy vs. Alliant Energy Corp | OGE Energy vs. CMS Energy | OGE Energy vs. CenterPoint Energy | OGE Energy vs. Pinnacle West Capital |
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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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