Correlation Between MGE Energy and Ameren Corp
Can any of the company-specific risk be diversified away by investing in both MGE Energy and Ameren Corp 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 MGE Energy and Ameren Corp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between MGE Energy and Ameren Corp, you can compare the effects of market volatilities on MGE Energy and Ameren Corp 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 MGE Energy with a short position of Ameren Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of MGE Energy and Ameren Corp.
Diversification Opportunities for MGE Energy and Ameren Corp
0.31 | Correlation Coefficient |
Weak diversification
The 3 months correlation between MGE and Ameren is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding MGE Energy and Ameren Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ameren Corp and MGE 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 MGE Energy are associated (or correlated) with Ameren Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ameren Corp has no effect on the direction of MGE Energy i.e., MGE Energy and Ameren Corp go up and down completely randomly.
Pair Corralation between MGE Energy and Ameren Corp
Given the investment horizon of 90 days MGE Energy is expected to under-perform the Ameren Corp. In addition to that, MGE Energy is 1.57 times more volatile than Ameren Corp. It trades about -0.05 of its total potential returns per unit of risk. Ameren Corp is currently generating about 0.2 per unit of volatility. If you would invest 8,899 in Ameren Corp on November 2, 2024 and sell it today you would earn a total of 512.00 from holding Ameren Corp or generate 5.75% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
MGE Energy vs. Ameren Corp
Performance |
| Timeline |
| MGE Energy |
| Ameren Corp |
MGE Energy and Ameren Corp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with MGE Energy and Ameren Corp
The main advantage of trading using opposite MGE Energy and Ameren Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MGE Energy position performs unexpectedly, Ameren Corp 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 Ameren Corp will offset losses from the drop in Ameren Corp's long position.| MGE Energy vs. CMS Energy | MGE Energy vs. Ameren Corp | MGE Energy vs. Pinnacle West Capital | MGE Energy vs. Evergy, |
| Ameren Corp vs. CMS Energy | Ameren Corp vs. Pinnacle West Capital | Ameren Corp vs. MGE Energy | Ameren Corp vs. Evergy, |
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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.
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