Correlation Between Allete and Power Assets
Can any of the company-specific risk be diversified away by investing in both Allete and Power Assets 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 Power Assets into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Allete Inc and Power Assets Holdings, you can compare the effects of market volatilities on Allete and Power Assets 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 Power Assets. Check out your portfolio center. Please also check ongoing floating volatility patterns of Allete and Power Assets.
Diversification Opportunities for Allete and Power Assets
0.13 | Correlation Coefficient |
Average diversification
The 3 months correlation between Allete and Power is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding Allete Inc and Power Assets Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Power Assets Holdings 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 Power Assets. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Power Assets Holdings has no effect on the direction of Allete i.e., Allete and Power Assets go up and down completely randomly.
Pair Corralation between Allete and Power Assets
Considering the 90-day investment horizon Allete is expected to generate 2.85 times less return on investment than Power Assets. But when comparing it to its historical volatility, Allete Inc is 3.69 times less risky than Power Assets. It trades about 0.13 of its potential returns per unit of risk. Power Assets Holdings is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 657.00 in Power Assets Holdings on October 1, 2024 and sell it today you would earn a total of 34.00 from holding Power Assets Holdings or generate 5.18% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 97.62% |
| Values | Daily Returns |
Allete Inc vs. Power Assets Holdings
Performance |
| Timeline |
| Allete Inc |
| Power Assets Holdings |
Allete and Power Assets Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Allete and Power Assets
The main advantage of trading using opposite Allete and Power Assets positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Allete position performs unexpectedly, Power Assets 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 Power Assets will offset losses from the drop in Power Assets' long position.| Allete vs. Avista | Allete vs. Black Hills | Allete vs. Montauk Renewables | Allete vs. Companhia Paranaense de |
| Power Assets vs. Energy of Minas | Power Assets vs. Avista | Power Assets vs. Allete Inc | Power Assets vs. The AES |
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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.
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