Correlation Between CenterPoint Energy and Ameren Corp

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Can any of the company-specific risk be diversified away by investing in both CenterPoint Energy and Ameren Corp 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 CenterPoint Energy and Ameren Corp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between CenterPoint Energy and Ameren Corp, you can compare the effects of market volatilities on CenterPoint Energy and Ameren Corp 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 CenterPoint Energy with a short position of Ameren Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of CenterPoint Energy and Ameren Corp.

Diversification Opportunities for CenterPoint Energy and Ameren Corp

0.83
  Correlation Coefficient

Very poor diversification

The 3 months correlation between CenterPoint and Ameren is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding CenterPoint Energy and Ameren Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ameren Corp and CenterPoint 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 CenterPoint Energy are associated (or correlated) with Ameren Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ameren Corp has no effect on the direction of CenterPoint Energy i.e., CenterPoint Energy and Ameren Corp go up and down completely randomly.

Pair Corralation between CenterPoint Energy and Ameren Corp

Considering the 90-day investment horizon CenterPoint Energy is expected to generate 1.46 times less return on investment than Ameren Corp. In addition to that, CenterPoint Energy is 1.17 times more volatile than Ameren Corp. It trades about 0.1 of its total potential returns per unit of risk. Ameren Corp is currently generating about 0.17 per unit of volatility. If you would invest  7,067  in Ameren Corp on December 29, 2023 and sell it today you would earn a total of  248.00  from holding Ameren Corp or generate 3.51% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthStrong
Accuracy100.0%
ValuesDaily Returns

CenterPoint Energy  vs.  Ameren Corp

 Performance 
       Timeline  
CenterPoint Energy 

Risk-Adjusted Performance

0 of 100

 
Low
 
High
Very Weak
Over the last 90 days CenterPoint Energy has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, CenterPoint Energy is not utilizing all of its potentials. The newest stock price agitation, may contribute to short-term losses for the retail investors.
Ameren Corp 

Risk-Adjusted Performance

2 of 100

 
Low
 
High
Weak
Compared to the overall equity markets, risk-adjusted returns on investments in Ameren Corp are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, Ameren Corp is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

CenterPoint Energy and Ameren Corp Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with CenterPoint Energy and Ameren Corp

The main advantage of trading using opposite CenterPoint Energy and Ameren Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CenterPoint Energy position performs unexpectedly, Ameren Corp 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 Ameren Corp will offset losses from the drop in Ameren Corp's long position.
The idea behind CenterPoint Energy and Ameren Corp pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
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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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..

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