Correlation Between Alliant Energy and FirstEnergy
Can any of the company-specific risk be diversified away by investing in both Alliant Energy and FirstEnergy 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 Alliant Energy and FirstEnergy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Alliant Energy Corp and FirstEnergy, you can compare the effects of market volatilities on Alliant Energy and FirstEnergy 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 Alliant Energy with a short position of FirstEnergy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alliant Energy and FirstEnergy.
Diversification Opportunities for Alliant Energy and FirstEnergy
0.08 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Alliant and FirstEnergy is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding Alliant Energy Corp and FirstEnergy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FirstEnergy and Alliant Energy 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 Alliant Energy Corp are associated (or correlated) with FirstEnergy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FirstEnergy has no effect on the direction of Alliant Energy i.e., Alliant Energy and FirstEnergy go up and down completely randomly.
Pair Corralation between Alliant Energy and FirstEnergy
Considering the 90-day investment horizon Alliant Energy Corp is expected to generate 1.98 times more return on investment than FirstEnergy. However, Alliant Energy is 1.98 times more volatile than FirstEnergy. It trades about 0.08 of its potential returns per unit of risk. FirstEnergy is currently generating about -0.18 per unit of risk. If you would invest 6,142 in Alliant Energy Corp on August 24, 2024 and sell it today you would earn a total of 178.00 from holding Alliant Energy Corp or generate 2.9% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Alliant Energy Corp vs. FirstEnergy
Performance |
| Timeline |
| Alliant Energy Corp |
| FirstEnergy |
Alliant Energy and FirstEnergy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Alliant Energy and FirstEnergy
The main advantage of trading using opposite Alliant Energy and FirstEnergy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Alliant Energy position performs unexpectedly, FirstEnergy 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 FirstEnergy will offset losses from the drop in FirstEnergy's long position.| Alliant Energy vs. Korea Electric Power | Alliant Energy vs. Centrais Electricas Brasileiras | Alliant Energy vs. MGE Energy | Alliant Energy vs. IDACORP |
| FirstEnergy vs. CenterPoint Energy | FirstEnergy vs. Pinnacle West Capital | FirstEnergy vs. Edison International | FirstEnergy vs. Public Service Enterprise |
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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.
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