Correlation Between Alliant Energy and Stepan
Can any of the company-specific risk be diversified away by investing in both Alliant Energy and Stepan 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 Stepan 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 Stepan Company, you can compare the effects of market volatilities on Alliant Energy and Stepan 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 Stepan. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alliant Energy and Stepan.
Diversification Opportunities for Alliant Energy and Stepan
-0.04 | Correlation Coefficient |
Good diversification
The 3 months correlation between Alliant and Stepan is -0.04. Overlapping area represents the amount of risk that can be diversified away by holding Alliant Energy Corp and Stepan Company in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Stepan Company 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 Stepan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Stepan Company has no effect on the direction of Alliant Energy i.e., Alliant Energy and Stepan go up and down completely randomly.
Pair Corralation between Alliant Energy and Stepan
Considering the 90-day investment horizon Alliant Energy Corp is expected to generate 0.71 times more return on investment than Stepan. However, Alliant Energy Corp is 1.41 times less risky than Stepan. It trades about 0.13 of its potential returns per unit of risk. Stepan Company is currently generating about 0.07 per unit of risk. If you would invest 6,064 in Alliant Energy Corp on August 29, 2024 and sell it today you would earn a total of 308.50 from holding Alliant Energy Corp or generate 5.09% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Alliant Energy Corp vs. Stepan Company
Performance |
| Timeline |
| Alliant Energy Corp |
| Stepan Company |
Alliant Energy and Stepan Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Alliant Energy and Stepan
The main advantage of trading using opposite Alliant Energy and Stepan positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Alliant Energy position performs unexpectedly, Stepan 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 Stepan will offset losses from the drop in Stepan'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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.
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