Correlation Between Connecticut Light and Ameren Illinois
Can any of the company-specific risk be diversified away by investing in both Connecticut Light 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 Connecticut Light and Ameren Illinois 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 Ameren Illinois, you can compare the effects of market volatilities on Connecticut Light 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 Connecticut Light with a short position of Ameren Illinois. Check out your portfolio center. Please also check ongoing floating volatility patterns of Connecticut Light and Ameren Illinois.
Diversification Opportunities for Connecticut Light and Ameren Illinois
0.46 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Connecticut and Ameren is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding The Connecticut Light and Ameren Illinois in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ameren Illinois 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 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 Connecticut Light i.e., Connecticut Light and Ameren Illinois go up and down completely randomly.
Pair Corralation between Connecticut Light and Ameren Illinois
Assuming the 90 days horizon The Connecticut Light is expected to generate 3.73 times more return on investment than Ameren Illinois. However, Connecticut Light is 3.73 times more volatile than Ameren Illinois. It trades about -0.05 of its potential returns per unit of risk. Ameren Illinois is currently generating about -0.2 per unit of risk. If you would invest 4,170 in The Connecticut Light on September 2, 2024 and sell it today you would lose (70.00) from holding The Connecticut Light or give up 1.68% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
The Connecticut Light vs. Ameren Illinois
Performance |
| Timeline |
| Connecticut Light |
| Ameren Illinois |
Connecticut Light and Ameren Illinois Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Connecticut Light and Ameren Illinois
The main advantage of trading using opposite Connecticut Light and Ameren Illinois positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Connecticut Light 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.| Connecticut Light vs. Southern Company | Connecticut Light vs. Duke Energy | Connecticut Light vs. Duke Energy | Connecticut Light vs. National Grid PLC |
| Ameren Illinois vs. Southern Company | Ameren Illinois vs. Duke Energy | Ameren Illinois vs. Duke Energy | Ameren Illinois vs. National Grid PLC |
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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.
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