Correlation Between Alliant Energy and PNM Resources
Can any of the company-specific risk be diversified away by investing in both Alliant Energy and PNM Resources 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 PNM Resources 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 PNM Resources, you can compare the effects of market volatilities on Alliant Energy and PNM Resources 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 PNM Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alliant Energy and PNM Resources.
Diversification Opportunities for Alliant Energy and PNM Resources
0.5 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Alliant and PNM is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Alliant Energy Corp and PNM Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PNM Resources 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 PNM Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PNM Resources has no effect on the direction of Alliant Energy i.e., Alliant Energy and PNM Resources go up and down completely randomly.
Pair Corralation between Alliant Energy and PNM Resources
Considering the 90-day investment horizon Alliant Energy Corp is expected to generate 0.91 times more return on investment than PNM Resources. However, Alliant Energy Corp is 1.09 times less risky than PNM Resources. It trades about 0.09 of its potential returns per unit of risk. PNM Resources is currently generating about 0.03 per unit of risk. If you would invest 4,966 in Alliant Energy Corp on August 27, 2024 and sell it today you would earn a total of 1,366 from holding Alliant Energy Corp or generate 27.51% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 85.89% |
| Values | Daily Returns |
Alliant Energy Corp vs. PNM Resources
Performance |
| Timeline |
| Alliant Energy Corp |
| PNM Resources |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Solid
Alliant Energy and PNM Resources Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Alliant Energy and PNM Resources
The main advantage of trading using opposite Alliant Energy and PNM Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Alliant Energy position performs unexpectedly, PNM Resources 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 PNM Resources will offset losses from the drop in PNM Resources' long position.| Alliant Energy vs. DTE Energy | Alliant Energy vs. Ameren Corp | Alliant Energy vs. CenterPoint Energy | Alliant Energy vs. Pinnacle West Capital |
| PNM Resources vs. Portland General Electric | PNM Resources vs. MGE Energy | PNM Resources vs. CMS Energy | PNM Resources vs. OGE Energy |
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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.
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