Correlation Between NorthWestern and AES
Can any of the company-specific risk be diversified away by investing in both NorthWestern and AES 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 NorthWestern and AES into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NorthWestern and The AES, you can compare the effects of market volatilities on NorthWestern and AES 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 NorthWestern with a short position of AES. Check out your portfolio center. Please also check ongoing floating volatility patterns of NorthWestern and AES.
Diversification Opportunities for NorthWestern and AES
0.37 | Correlation Coefficient |
Weak diversification
The 3 months correlation between NorthWestern and AES is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding NorthWestern and The AES in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AES and NorthWestern 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 NorthWestern are associated (or correlated) with AES. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AES has no effect on the direction of NorthWestern i.e., NorthWestern and AES go up and down completely randomly.
Pair Corralation between NorthWestern and AES
Considering the 90-day investment horizon NorthWestern is expected to generate 0.39 times more return on investment than AES. However, NorthWestern is 2.54 times less risky than AES. It trades about 0.1 of its potential returns per unit of risk. The AES is currently generating about -0.33 per unit of risk. If you would invest 5,534 in NorthWestern on August 27, 2024 and sell it today you would earn a total of 141.00 from holding NorthWestern or generate 2.55% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
NorthWestern vs. The AES
Performance |
| Timeline |
| NorthWestern |
| AES |
NorthWestern and AES Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with NorthWestern and AES
The main advantage of trading using opposite NorthWestern and AES positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NorthWestern position performs unexpectedly, AES 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 AES will offset losses from the drop in AES's long position.| NorthWestern vs. Allete Inc | NorthWestern vs. Black Hills | NorthWestern vs. Otter Tail | NorthWestern vs. Avista |
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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.
Other Complementary Tools
| Pair Correlation Compare performance and examine fundamental relationship between any two equity instruments | |
| Portfolio Manager State of the art Portfolio Manager to monitor and improve performance of your invested capital | |
| Portfolio Suggestion Get suggestions outside of your existing asset allocation including your own model portfolios | |
| Funds Screener Find actively-traded funds from around the world traded on over 30 global exchanges | |
| Fundamentals Comparison Compare fundamentals across multiple equities to find investing opportunities |