Correlation Between Avangrid and Alliant Energy
Can any of the company-specific risk be diversified away by investing in both Avangrid and Alliant 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 Avangrid and Alliant Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Avangrid and Alliant Energy Corp, you can compare the effects of market volatilities on Avangrid and Alliant 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 Avangrid with a short position of Alliant Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Avangrid and Alliant Energy.
Diversification Opportunities for Avangrid and Alliant Energy
0.72 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Avangrid and Alliant is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Avangrid and Alliant Energy Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alliant Energy Corp and Avangrid 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 Avangrid are associated (or correlated) with Alliant Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alliant Energy Corp has no effect on the direction of Avangrid i.e., Avangrid and Alliant Energy go up and down completely randomly.
Pair Corralation between Avangrid and Alliant Energy
Considering the 90-day investment horizon Avangrid is expected to generate 4.6 times less return on investment than Alliant Energy. But when comparing it to its historical volatility, Avangrid is 6.13 times less risky than Alliant Energy. It trades about 0.17 of its potential returns per unit of risk. Alliant Energy Corp is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest 6,064 in Alliant Energy Corp on August 27, 2024 and sell it today you would earn a total of 268.00 from holding Alliant Energy Corp or generate 4.42% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Avangrid vs. Alliant Energy Corp
Performance |
| Timeline |
| Avangrid |
| Alliant Energy Corp |
Avangrid and Alliant Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Avangrid and Alliant Energy
The main advantage of trading using opposite Avangrid and Alliant Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Avangrid position performs unexpectedly, Alliant 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 Alliant Energy will offset losses from the drop in Alliant Energy's long position.The idea behind Avangrid and Alliant Energy Corp 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.| Alliant Energy vs. DTE Energy | Alliant Energy vs. Ameren Corp | Alliant Energy vs. CenterPoint Energy | Alliant 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.
Other Complementary Tools
| Performance Analysis Check effects of mean-variance optimization against your current asset allocation | |
| Price Ceiling Movement Calculate and plot Price Ceiling Movement for different equity instruments | |
| Portfolio Analyzer Portfolio analysis module that provides access to portfolio diagnostics and optimization engine | |
| Portfolio Rebalancing Analyze risk-adjusted returns against different time horizons to find asset-allocation targets | |
| Stocks Directory Find actively traded stocks across global markets |