Correlation Between Allete and RWE AG
Can any of the company-specific risk be diversified away by investing in both Allete and RWE AG 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 RWE AG into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Allete Inc and RWE AG PK, you can compare the effects of market volatilities on Allete and RWE AG 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 RWE AG. Check out your portfolio center. Please also check ongoing floating volatility patterns of Allete and RWE AG.
Diversification Opportunities for Allete and RWE AG
Excellent diversification
The 3 months correlation between Allete and RWE is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding Allete Inc and RWE AG PK in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RWE AG PK 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 RWE AG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RWE AG PK has no effect on the direction of Allete i.e., Allete and RWE AG go up and down completely randomly.
Pair Corralation between Allete and RWE AG
Considering the 90-day investment horizon Allete Inc is expected to generate 0.78 times more return on investment than RWE AG. However, Allete Inc is 1.28 times less risky than RWE AG. It trades about 0.02 of its potential returns per unit of risk. RWE AG PK is currently generating about -0.03 per unit of risk. If you would invest 5,925 in Allete Inc on August 27, 2024 and sell it today you would earn a total of 568.00 from holding Allete Inc or generate 9.59% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Allete Inc vs. RWE AG PK
Performance |
| Timeline |
| Allete Inc |
| RWE AG PK |
Allete and RWE AG Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Allete and RWE AG
The main advantage of trading using opposite Allete and RWE AG positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Allete position performs unexpectedly, RWE AG 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 RWE AG will offset losses from the drop in RWE AG's long position.| Allete vs. Avista | Allete vs. Black Hills | Allete vs. Montauk Renewables | Allete vs. Companhia Paranaense de |
| RWE AG vs. TransAlta Corp | RWE AG vs. Pampa Energia SA | RWE AG vs. Vistra Energy Corp | RWE AG vs. NRG 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..
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