Correlation Between Alliant Energy and Public Service
Can any of the company-specific risk be diversified away by investing in both Alliant Energy and Public Service 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 Public Service 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 Public Service Enterprise, you can compare the effects of market volatilities on Alliant Energy and Public Service 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 Public Service. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alliant Energy and Public Service.
Diversification Opportunities for Alliant Energy and Public Service
0.75 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Alliant and Public is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Alliant Energy Corp and Public Service Enterprise in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Public Service Enterprise 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 Public Service. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Public Service Enterprise has no effect on the direction of Alliant Energy i.e., Alliant Energy and Public Service go up and down completely randomly.
Pair Corralation between Alliant Energy and Public Service
Considering the 90-day investment horizon Alliant Energy Corp is expected to generate 0.89 times more return on investment than Public Service. However, Alliant Energy Corp is 1.12 times less risky than Public Service. It trades about 0.14 of its potential returns per unit of risk. Public Service Enterprise is currently generating about 0.08 per unit of risk. If you would invest 6,064 in Alliant Energy Corp on August 28, 2024 and sell it today you would earn a total of 299.00 from holding Alliant Energy Corp or generate 4.93% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Alliant Energy Corp vs. Public Service Enterprise
Performance |
| Timeline |
| Alliant Energy Corp |
| Public Service Enterprise |
Alliant Energy and Public Service Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Alliant Energy and Public Service
The main advantage of trading using opposite Alliant Energy and Public Service positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Alliant Energy position performs unexpectedly, Public Service 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 Public Service will offset losses from the drop in Public Service's long position.| Alliant Energy vs. DTE Energy | Alliant Energy vs. Ameren Corp | Alliant Energy vs. CenterPoint Energy | Alliant Energy vs. Pinnacle West Capital |
| Public Service vs. CenterPoint Energy | Public Service vs. FirstEnergy | Public Service vs. Pinnacle West Capital | Public Service vs. Edison International |
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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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