Correlation Between Public Service and Alliant Energy
Can any of the company-specific risk be diversified away by investing in both Public Service and Alliant Energy 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 Public Service and Alliant Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Public Service Enterprise and Alliant Energy Corp, you can compare the effects of market volatilities on Public Service and Alliant Energy 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 Public Service with a short position of Alliant Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Public Service and Alliant Energy.
Diversification Opportunities for Public Service and Alliant Energy
0.75 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Public and Alliant is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Public Service Enterprise and Alliant Energy Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alliant Energy Corp and Public Service 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 Public Service Enterprise are associated (or correlated) with Alliant Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alliant Energy Corp has no effect on the direction of Public Service i.e., Public Service and Alliant Energy go up and down completely randomly.
Pair Corralation between Public Service and Alliant Energy
Considering the 90-day investment horizon Public Service is expected to generate 1.58 times less return on investment than Alliant Energy. In addition to that, Public Service is 1.12 times more volatile than Alliant Energy Corp. It trades about 0.08 of its total potential returns per unit of risk. Alliant Energy Corp is currently generating about 0.14 per unit of volatility. If you would invest 6,064 in Alliant Energy Corp on August 28, 2024 and sell it today you would earn a total of 299.00 from holding Alliant Energy Corp or generate 4.93% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Public Service Enterprise vs. Alliant Energy Corp
Performance |
| Timeline |
| Public Service Enterprise |
| Alliant Energy Corp |
Public Service and Alliant Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Public Service and Alliant Energy
The main advantage of trading using opposite Public Service and Alliant Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Public Service position performs unexpectedly, Alliant Energy 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 Alliant Energy will offset losses from the drop in Alliant Energy's long position.| Public Service vs. CenterPoint Energy | Public Service vs. FirstEnergy | Public Service vs. Pinnacle West Capital | Public Service vs. Edison International |
| 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.
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