Correlation Between MGE Energy and Fortis
Can any of the company-specific risk be diversified away by investing in both MGE Energy and Fortis 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 Fortis into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between MGE Energy and Fortis Inc, you can compare the effects of market volatilities on MGE Energy and Fortis 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 Fortis. Check out your portfolio center. Please also check ongoing floating volatility patterns of MGE Energy and Fortis.
Diversification Opportunities for MGE Energy and Fortis
0.16 | Correlation Coefficient |
Average diversification
The 3 months correlation between MGE and Fortis is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding MGE Energy and Fortis Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fortis Inc 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 Fortis. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fortis Inc has no effect on the direction of MGE Energy i.e., MGE Energy and Fortis go up and down completely randomly.
Pair Corralation between MGE Energy and Fortis
Given the investment horizon of 90 days MGE Energy is expected to generate 2.19 times more return on investment than Fortis. However, MGE Energy is 2.19 times more volatile than Fortis Inc. It trades about 0.31 of its potential returns per unit of risk. Fortis Inc is currently generating about 0.18 per unit of risk. If you would invest 9,020 in MGE Energy on August 30, 2024 and sell it today you would earn a total of 1,456 from holding MGE Energy or generate 16.14% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
MGE Energy vs. Fortis Inc
Performance |
| Timeline |
| MGE Energy |
| Fortis Inc |
MGE Energy and Fortis Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with MGE Energy and Fortis
The main advantage of trading using opposite MGE Energy and Fortis positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MGE Energy position performs unexpectedly, Fortis 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 Fortis will offset losses from the drop in Fortis' long position.| MGE Energy vs. CMS Energy | MGE Energy vs. Ameren Corp | MGE Energy vs. Pinnacle West Capital | MGE Energy 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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