Correlation Between Houston Natural and Ameren Illinois
Can any of the company-specific risk be diversified away by investing in both Houston Natural 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 Houston Natural and Ameren Illinois into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Houston Natural Resources and Ameren Illinois, you can compare the effects of market volatilities on Houston Natural 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 Houston Natural with a short position of Ameren Illinois. Check out your portfolio center. Please also check ongoing floating volatility patterns of Houston Natural and Ameren Illinois.
Diversification Opportunities for Houston Natural and Ameren Illinois
-0.55 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Houston and Ameren is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding Houston Natural Resources and Ameren Illinois in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ameren Illinois and Houston Natural 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 Houston Natural Resources 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 Houston Natural i.e., Houston Natural and Ameren Illinois go up and down completely randomly.
Pair Corralation between Houston Natural and Ameren Illinois
Given the investment horizon of 90 days Houston Natural Resources is expected to generate 19.04 times more return on investment than Ameren Illinois. However, Houston Natural is 19.04 times more volatile than Ameren Illinois. It trades about 0.07 of its potential returns per unit of risk. Ameren Illinois is currently generating about -0.06 per unit of risk. If you would invest 2.05 in Houston Natural Resources on September 1, 2024 and sell it today you would lose (0.25) from holding Houston Natural Resources or give up 12.2% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Houston Natural Resources vs. Ameren Illinois
Performance |
| Timeline |
| Houston Natural Resources |
| Ameren Illinois |
Houston Natural and Ameren Illinois Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Houston Natural and Ameren Illinois
The main advantage of trading using opposite Houston Natural and Ameren Illinois positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Houston Natural 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.| Houston Natural vs. Ecoloclean Industrs | Houston Natural vs. JPX Global | Houston Natural vs. Majic Wheels Corp | Houston Natural vs. BQE Water |
| Ameren Illinois vs. Nok Airlines Public | Ameren Illinois vs. Assurant | Ameren Illinois vs. Volaris | Ameren Illinois vs. Direct Line Insurance |
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 Global Correlations module to find global opportunities by holding instruments from different markets.
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