Correlation Between Connecticut Light and WEC Energy
Can any of the company-specific risk be diversified away by investing in both Connecticut Light and WEC Energy 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 Connecticut Light and WEC Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between The Connecticut Light and WEC Energy Group, you can compare the effects of market volatilities on Connecticut Light and WEC Energy 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 Connecticut Light with a short position of WEC Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Connecticut Light and WEC Energy.
Diversification Opportunities for Connecticut Light and WEC Energy
0.16 | Correlation Coefficient |
Average diversification
The 3 months correlation between Connecticut and WEC is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding The Connecticut Light and WEC Energy Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WEC Energy Group and Connecticut Light 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 The Connecticut Light are associated (or correlated) with WEC Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WEC Energy Group has no effect on the direction of Connecticut Light i.e., Connecticut Light and WEC Energy go up and down completely randomly.
Pair Corralation between Connecticut Light and WEC Energy
Assuming the 90 days horizon Connecticut Light is expected to generate 7.14 times less return on investment than WEC Energy. In addition to that, Connecticut Light is 1.06 times more volatile than WEC Energy Group. It trades about 0.04 of its total potential returns per unit of risk. WEC Energy Group is currently generating about 0.32 per unit of volatility. If you would invest 9,475 in WEC Energy Group on September 2, 2024 and sell it today you would earn a total of 630.00 from holding WEC Energy Group or generate 6.65% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
The Connecticut Light vs. WEC Energy Group
Performance |
| Timeline |
| Connecticut Light |
| WEC Energy Group |
Connecticut Light and WEC Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Connecticut Light and WEC Energy
The main advantage of trading using opposite Connecticut Light and WEC Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Connecticut Light position performs unexpectedly, WEC Energy 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 WEC Energy will offset losses from the drop in WEC Energy's long position.The idea behind The Connecticut Light and WEC Energy Group pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| WEC Energy vs. Alliant Energy Corp | WEC Energy vs. CMS Energy | WEC Energy vs. Exelon | WEC Energy vs. Evergy, |
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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
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