Correlation Between Allete and Canadian Utilities
Can any of the company-specific risk be diversified away by investing in both Allete and Canadian Utilities 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 Allete and Canadian Utilities into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Allete Inc and Canadian Utilities Limited, you can compare the effects of market volatilities on Allete and Canadian Utilities 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 Allete with a short position of Canadian Utilities. Check out your portfolio center. Please also check ongoing floating volatility patterns of Allete and Canadian Utilities.
Diversification Opportunities for Allete and Canadian Utilities
-0.02 | Correlation Coefficient |
Good diversification
The 3 months correlation between Allete and Canadian is -0.02. Overlapping area represents the amount of risk that can be diversified away by holding Allete Inc and Canadian Utilities Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Canadian Utilities and Allete 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 Allete Inc are associated (or correlated) with Canadian Utilities. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Canadian Utilities has no effect on the direction of Allete i.e., Allete and Canadian Utilities go up and down completely randomly.
Pair Corralation between Allete and Canadian Utilities
Considering the 90-day investment horizon Allete Inc is expected to generate 0.61 times more return on investment than Canadian Utilities. However, Allete Inc is 1.63 times less risky than Canadian Utilities. It trades about 0.04 of its potential returns per unit of risk. Canadian Utilities Limited is currently generating about 0.01 per unit of risk. If you would invest 5,457 in Allete Inc on September 1, 2024 and sell it today you would earn a total of 1,031 from holding Allete Inc or generate 18.89% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 99.34% |
| Values | Daily Returns |
Allete Inc vs. Canadian Utilities Limited
Performance |
| Timeline |
| Allete Inc |
| Canadian Utilities |
Allete and Canadian Utilities Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Allete and Canadian Utilities
The main advantage of trading using opposite Allete and Canadian Utilities positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Allete position performs unexpectedly, Canadian Utilities 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 Canadian Utilities will offset losses from the drop in Canadian Utilities' long position.| Allete vs. The AES | Allete vs. Avista | Allete vs. Brookfield Infrastructure Partners | Allete vs. Companhia Energetica de |
| Canadian Utilities vs. AuraSource | Canadian Utilities vs. Energy of Minas | Canadian Utilities vs. Allete Inc | Canadian Utilities vs. Avista |
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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.
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