Correlation Between Ameren Illinois and Connecticut Light
Can any of the company-specific risk be diversified away by investing in both Ameren Illinois and Connecticut Light 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 Ameren Illinois and Connecticut Light into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ameren Illinois and The Connecticut Light, you can compare the effects of market volatilities on Ameren Illinois and Connecticut Light 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 Ameren Illinois with a short position of Connecticut Light. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ameren Illinois and Connecticut Light.
Diversification Opportunities for Ameren Illinois and Connecticut Light
0.54 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Ameren and Connecticut is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Ameren Illinois and The Connecticut Light in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Connecticut Light and Ameren Illinois 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 Ameren Illinois are associated (or correlated) with Connecticut Light. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Connecticut Light has no effect on the direction of Ameren Illinois i.e., Ameren Illinois and Connecticut Light go up and down completely randomly.
Pair Corralation between Ameren Illinois and Connecticut Light
Assuming the 90 days horizon Ameren Illinois is expected to generate 0.82 times more return on investment than Connecticut Light. However, Ameren Illinois is 1.21 times less risky than Connecticut Light. It trades about 0.02 of its potential returns per unit of risk. The Connecticut Light is currently generating about -0.05 per unit of risk. If you would invest 8,079 in Ameren Illinois on September 12, 2024 and sell it today you would earn a total of 116.00 from holding Ameren Illinois or generate 1.44% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Ameren Illinois vs. The Connecticut Light
Performance |
| Timeline |
| Ameren Illinois |
| Connecticut Light |
Ameren Illinois and Connecticut Light Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ameren Illinois and Connecticut Light
The main advantage of trading using opposite Ameren Illinois and Connecticut Light positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ameren Illinois position performs unexpectedly, Connecticut Light 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 Connecticut Light will offset losses from the drop in Connecticut Light's long position.| Ameren Illinois vs. Duke Energy | Ameren Illinois vs. Consolidated Edison | Ameren Illinois vs. Dominion Energy | Ameren Illinois vs. American Electric Power |
| Connecticut Light vs. Duke Energy | Connecticut Light vs. Southern Company | Connecticut Light vs. American Electric Power | Connecticut Light vs. Nextera Energy |
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.
Other Complementary Tools
| Investing Opportunities Build portfolios using our predefined set of ideas and optimize them against your investing preferences | |
| Bond Analysis Evaluate and analyze corporate bonds as a potential investment for your portfolios. | |
| Idea Optimizer Use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio | |
| Efficient Frontier Plot and analyze your portfolio and positions against risk-return landscape of the market. | |
| Share Portfolio Track or share privately all of your investments from the convenience of any device |