Correlation Between Red Electrica and Consumers Energy
Can any of the company-specific risk be diversified away by investing in both Red Electrica and Consumers 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 Red Electrica and Consumers Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Red Electrica Corporacion and Consumers Energy, you can compare the effects of market volatilities on Red Electrica and Consumers 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 Red Electrica with a short position of Consumers Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Red Electrica and Consumers Energy.
Diversification Opportunities for Red Electrica and Consumers Energy
-0.02 | Correlation Coefficient |
Good diversification
The 3 months correlation between Red and Consumers is -0.02. Overlapping area represents the amount of risk that can be diversified away by holding Red Electrica Corporacion and Consumers Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Consumers Energy and Red Electrica 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 Red Electrica Corporacion are associated (or correlated) with Consumers Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Consumers Energy has no effect on the direction of Red Electrica i.e., Red Electrica and Consumers Energy go up and down completely randomly.
Pair Corralation between Red Electrica and Consumers Energy
Assuming the 90 days horizon Red Electrica Corporacion is expected to generate 1.23 times more return on investment than Consumers Energy. However, Red Electrica is 1.23 times more volatile than Consumers Energy. It trades about -0.04 of its potential returns per unit of risk. Consumers Energy is currently generating about -0.19 per unit of risk. If you would invest 906.00 in Red Electrica Corporacion on August 28, 2024 and sell it today you would lose (13.00) from holding Red Electrica Corporacion or give up 1.43% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Red Electrica Corporacion vs. Consumers Energy
Performance |
| Timeline |
| Red Electrica Corporacion |
| Consumers Energy |
Red Electrica and Consumers Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Red Electrica and Consumers Energy
The main advantage of trading using opposite Red Electrica and Consumers Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Red Electrica position performs unexpectedly, Consumers 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 Consumers Energy will offset losses from the drop in Consumers Energy's long position.| Red Electrica vs. NVIDIA | Red Electrica vs. Blacksky Technology | Red Electrica vs. Crowdstrike Holdings | Red Electrica vs. Cintas |
| Consumers Energy vs. Nextera Energy | Consumers Energy vs. Duke Energy | Consumers Energy vs. PGE Corp | Consumers Energy vs. Southern Company |
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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
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