Correlation Between Ameren Illinois and BFC Capital
Can any of the company-specific risk be diversified away by investing in both Ameren Illinois and BFC Capital 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 BFC Capital into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ameren Illinois and BFC Capital Trust, you can compare the effects of market volatilities on Ameren Illinois and BFC Capital 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 BFC Capital. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ameren Illinois and BFC Capital.
Diversification Opportunities for Ameren Illinois and BFC Capital
0.07 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Ameren and BFC is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding Ameren Illinois and BFC Capital Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BFC Capital Trust 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 BFC Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BFC Capital Trust has no effect on the direction of Ameren Illinois i.e., Ameren Illinois and BFC Capital go up and down completely randomly.
Pair Corralation between Ameren Illinois and BFC Capital
Assuming the 90 days horizon Ameren Illinois is expected to generate 1.44 times less return on investment than BFC Capital. In addition to that, Ameren Illinois is 2.33 times more volatile than BFC Capital Trust. It trades about 0.01 of its total potential returns per unit of risk. BFC Capital Trust is currently generating about 0.05 per unit of volatility. If you would invest 2,475 in BFC Capital Trust on September 1, 2024 and sell it today you would earn a total of 95.00 from holding BFC Capital Trust or generate 3.84% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 99.21% |
| Values | Daily Returns |
Ameren Illinois vs. BFC Capital Trust
Performance |
| Timeline |
| Ameren Illinois |
| BFC Capital Trust |
Ameren Illinois and BFC Capital Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ameren Illinois and BFC Capital
The main advantage of trading using opposite Ameren Illinois and BFC Capital positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ameren Illinois position performs unexpectedly, BFC Capital 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 BFC Capital will offset losses from the drop in BFC Capital's long position.| Ameren Illinois vs. Nok Airlines Public | Ameren Illinois vs. Assurant | Ameren Illinois vs. Volaris | Ameren Illinois vs. Direct Line Insurance |
| BFC Capital vs. Popular Capital Trust | BFC Capital vs. CHS Inc CN | BFC Capital vs. Wintrust Financial Corp | BFC Capital vs. Auburn National Bancorporation |
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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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