Correlation Between WEC Energy and Union Electric
Can any of the company-specific risk be diversified away by investing in both WEC Energy and Union Electric 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 Union Electric 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 Union Electric, you can compare the effects of market volatilities on WEC Energy and Union Electric 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 Union Electric. Check out your portfolio center. Please also check ongoing floating volatility patterns of WEC Energy and Union Electric.
Diversification Opportunities for WEC Energy and Union Electric
0.21 | Correlation Coefficient |
Modest diversification
The 3 months correlation between WEC and Union is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding WEC Energy Group and Union Electric in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Union Electric 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 Union Electric. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Union Electric has no effect on the direction of WEC Energy i.e., WEC Energy and Union Electric go up and down completely randomly.
Pair Corralation between WEC Energy and Union Electric
Considering the 90-day investment horizon WEC Energy is expected to generate 1.26 times less return on investment than Union Electric. But when comparing it to its historical volatility, WEC Energy Group is 3.64 times less risky than Union Electric. It trades about 0.09 of its potential returns per unit of risk. Union Electric is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 9,217 in Union Electric on January 6, 2025 and sell it today you would earn a total of 383.00 from holding Union Electric or generate 4.16% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 32.0% |
| Values | Daily Returns |
WEC Energy Group vs. Union Electric
Performance |
| Timeline |
| WEC Energy Group |
| Union Electric |
WEC Energy and Union Electric Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with WEC Energy and Union Electric
The main advantage of trading using opposite WEC Energy and Union Electric positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if WEC Energy position performs unexpectedly, Union Electric 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 Union Electric will offset losses from the drop in Union Electric's long position.| WEC Energy vs. Alliant Energy Corp | WEC Energy vs. CMS Energy | WEC Energy vs. Exelon | WEC Energy vs. Evergy, |
| Union Electric vs. Engie Brasil Energia | Union Electric vs. Centrais Eltricas Brasileiras | Union Electric vs. Centrais Electricas Brasileiras | Union Electric vs. Ameren Corp |
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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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