Correlation Between Alliant Energy and PPL
Can any of the company-specific risk be diversified away by investing in both Alliant Energy and PPL 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 PPL 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 PPL Corporation, you can compare the effects of market volatilities on Alliant Energy and PPL 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 PPL. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alliant Energy and PPL.
Diversification Opportunities for Alliant Energy and PPL
0.74 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Alliant and PPL is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Alliant Energy Corp and PPL Corp. in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PPL Corporation 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 PPL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PPL Corporation has no effect on the direction of Alliant Energy i.e., Alliant Energy and PPL go up and down completely randomly.
Pair Corralation between Alliant Energy and PPL
Considering the 90-day investment horizon Alliant Energy is expected to generate 1.43 times less return on investment than PPL. In addition to that, Alliant Energy is 1.38 times more volatile than PPL Corporation. It trades about 0.11 of its total potential returns per unit of risk. PPL Corporation is currently generating about 0.22 per unit of volatility. If you would invest 3,268 in PPL Corporation on August 23, 2024 and sell it today you would earn a total of 217.00 from holding PPL Corporation or generate 6.64% 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. PPL Corp.
Performance |
| Timeline |
| Alliant Energy Corp |
| PPL Corporation |
Alliant Energy and PPL Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Alliant Energy and PPL
The main advantage of trading using opposite Alliant Energy and PPL positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Alliant Energy position performs unexpectedly, PPL 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 PPL will offset losses from the drop in PPL's long position.| Alliant Energy vs. DTE Energy | Alliant Energy vs. Ameren Corp | Alliant Energy vs. CenterPoint Energy | Alliant Energy vs. Pinnacle West Capital |
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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.
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