Correlation Between Verde Clean and MGE Energy
Can any of the company-specific risk be diversified away by investing in both Verde Clean and MGE 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 Verde Clean and MGE Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Verde Clean Fuels and MGE Energy, you can compare the effects of market volatilities on Verde Clean and MGE 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 Verde Clean with a short position of MGE Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Verde Clean and MGE Energy.
Diversification Opportunities for Verde Clean and MGE Energy
0.8 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Verde and MGE is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Verde Clean Fuels and MGE Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MGE Energy and Verde Clean 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 Verde Clean Fuels are associated (or correlated) with MGE Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MGE Energy has no effect on the direction of Verde Clean i.e., Verde Clean and MGE Energy go up and down completely randomly.
Pair Corralation between Verde Clean and MGE Energy
Given the investment horizon of 90 days Verde Clean Fuels is expected to under-perform the MGE Energy. In addition to that, Verde Clean is 3.18 times more volatile than MGE Energy. It trades about -0.13 of its total potential returns per unit of risk. MGE Energy is currently generating about -0.06 per unit of volatility. If you would invest 8,252 in MGE Energy on September 25, 2025 and sell it today you would lose (386.00) from holding MGE Energy or give up 4.68% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Verde Clean Fuels vs. MGE Energy
Performance |
| Timeline |
| Verde Clean Fuels |
| MGE Energy |
Verde Clean and MGE Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Verde Clean and MGE Energy
The main advantage of trading using opposite Verde Clean and MGE Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Verde Clean position performs unexpectedly, MGE 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 MGE Energy will offset losses from the drop in MGE Energy's long position.| Verde Clean vs. NextNRG | Verde Clean vs. SolarBank Common | Verde Clean vs. Rain Enhancement Technologies | Verde Clean vs. Entergy Mississippi LLC |
| MGE Energy vs. CMS Energy | MGE Energy vs. Emera Incorporated | MGE Energy vs. Companhia de Saneamento | MGE Energy vs. NiSource |
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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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