Correlation Between WEC Energy and BZAM
Can any of the company-specific risk be diversified away by investing in both WEC Energy and BZAM 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 WEC Energy and BZAM into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between WEC Energy Group and BZAM, you can compare the effects of market volatilities on WEC Energy and BZAM 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 WEC Energy with a short position of BZAM. Check out your portfolio center. Please also check ongoing floating volatility patterns of WEC Energy and BZAM.
Diversification Opportunities for WEC Energy and BZAM
-0.58 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between WEC and BZAM is -0.58. Overlapping area represents the amount of risk that can be diversified away by holding WEC Energy Group and BZAM in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BZAM and WEC 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 WEC Energy Group are associated (or correlated) with BZAM. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BZAM has no effect on the direction of WEC Energy i.e., WEC Energy and BZAM go up and down completely randomly.
Pair Corralation between WEC Energy and BZAM
Considering the 90-day investment horizon WEC Energy is expected to generate 65.96 times less return on investment than BZAM. But when comparing it to its historical volatility, WEC Energy Group is 105.99 times less risky than BZAM. It trades about 0.14 of its potential returns per unit of risk. BZAM is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 3.20 in BZAM on September 1, 2024 and sell it today you would lose (3.20) from holding BZAM or give up 100.0% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 99.47% |
| Values | Daily Returns |
WEC Energy Group vs. BZAM
Performance |
| Timeline |
| WEC Energy Group |
| BZAM |
WEC Energy and BZAM Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with WEC Energy and BZAM
The main advantage of trading using opposite WEC Energy and BZAM positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if WEC Energy position performs unexpectedly, BZAM 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 BZAM will offset losses from the drop in BZAM's long position.| WEC Energy vs. Alliant Energy Corp | WEC Energy vs. CMS Energy | WEC Energy vs. Exelon | WEC 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.
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