Correlation Between BFC Capital and Ameren Illinois
Can any of the company-specific risk be diversified away by investing in both BFC Capital and Ameren Illinois 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 BFC Capital and Ameren Illinois into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between BFC Capital Trust and Ameren Illinois, you can compare the effects of market volatilities on BFC Capital and Ameren Illinois 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 BFC Capital with a short position of Ameren Illinois. Check out your portfolio center. Please also check ongoing floating volatility patterns of BFC Capital and Ameren Illinois.
Diversification Opportunities for BFC Capital and Ameren Illinois
0.13 | Correlation Coefficient |
Average diversification
The 3 months correlation between BFC and Ameren is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding BFC Capital Trust and Ameren Illinois in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ameren Illinois and BFC Capital 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 BFC Capital Trust are associated (or correlated) with Ameren Illinois. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ameren Illinois has no effect on the direction of BFC Capital i.e., BFC Capital and Ameren Illinois go up and down completely randomly.
Pair Corralation between BFC Capital and Ameren Illinois
Assuming the 90 days horizon BFC Capital Trust is expected to generate 0.52 times more return on investment than Ameren Illinois. However, BFC Capital Trust is 1.91 times less risky than Ameren Illinois. It trades about 0.05 of its potential returns per unit of risk. Ameren Illinois is currently generating about 0.01 per unit of risk. 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 | 100.0% |
| Values | Daily Returns |
BFC Capital Trust vs. Ameren Illinois
Performance |
| Timeline |
| BFC Capital Trust |
| Ameren Illinois |
BFC Capital and Ameren Illinois Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BFC Capital and Ameren Illinois
The main advantage of trading using opposite BFC Capital and Ameren Illinois positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BFC Capital position performs unexpectedly, Ameren Illinois 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 Ameren Illinois will offset losses from the drop in Ameren Illinois' long position.| BFC Capital vs. Popular Capital Trust | BFC Capital vs. CHS Inc CN | BFC Capital vs. Wintrust Financial Corp | BFC Capital vs. Auburn National Bancorporation |
| Ameren Illinois vs. Ameren Illinois | Ameren Illinois vs. The Connecticut Light | Ameren Illinois vs. Southern Company | Ameren Illinois vs. The Connecticut Light |
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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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