Correlation Between Entergy and Ameren Corp

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Can any of the company-specific risk be diversified away by investing in both Entergy and Ameren Corp 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 Entergy and Ameren Corp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Entergy and Ameren Corp, you can compare the effects of market volatilities on Entergy and Ameren Corp 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 Entergy with a short position of Ameren Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Entergy and Ameren Corp.

Diversification Opportunities for Entergy and Ameren Corp

EntergyAmerenDiversified AwayEntergyAmerenDiversified Away100%
0.87
  Correlation Coefficient

Very poor diversification

The 3 months correlation between Entergy and Ameren is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Entergy and Ameren Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ameren Corp and Entergy 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 Entergy are associated (or correlated) with Ameren Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ameren Corp has no effect on the direction of Entergy i.e., Entergy and Ameren Corp go up and down completely randomly.

Pair Corralation between Entergy and Ameren Corp

Considering the 90-day investment horizon Entergy is expected to generate 1.99 times more return on investment than Ameren Corp. However, Entergy is 1.99 times more volatile than Ameren Corp. It trades about 0.27 of its potential returns per unit of risk. Ameren Corp is currently generating about 0.32 per unit of risk. If you would invest  7,822  in Entergy on November 27, 2024 and sell it today you would earn a total of  722.00  from holding Entergy or generate 9.23% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthStrong
Accuracy100.0%
ValuesDaily Returns

Entergy  vs.  Ameren Corp

 Performance 
JavaScript chart by amCharts 3.21.15Dec2025Feb -5051015
JavaScript chart by amCharts 3.21.15ETR AEE
       Timeline  
Entergy 

Risk-Adjusted Performance

OK

 
Weak
 
Strong
Compared to the overall equity markets, risk-adjusted returns on investments in Entergy are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Even with relatively uncertain basic indicators, Entergy may actually be approaching a critical reversion point that can send shares even higher in March 2025.
JavaScript chart by amCharts 3.21.15DecJanFebJanFeb7476788082848688
Ameren Corp 

Risk-Adjusted Performance

Modest

 
Weak
 
Strong
Compared to the overall equity markets, risk-adjusted returns on investments in Ameren Corp are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, Ameren Corp is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.
JavaScript chart by amCharts 3.21.15DecJanFebJanFeb889092949698100

Entergy and Ameren Corp Volatility Contrast

   Predicted Return Density   
JavaScript chart by amCharts 3.21.15-4.41-3.33-2.24-1.16-0.07351.12.283.464.635.81 0.050.100.150.200.250.30
JavaScript chart by amCharts 3.21.15ETR AEE
       Returns  

Pair Trading with Entergy and Ameren Corp

The main advantage of trading using opposite Entergy and Ameren Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Entergy position performs unexpectedly, Ameren Corp 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 Corp will offset losses from the drop in Ameren Corp's long position.
The idea behind Entergy and Ameren Corp 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.
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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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.

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