Correlation Between Alliant Energy and Entergy Texas

Can any of the company-specific risk be diversified away by investing in both Alliant Energy and Entergy Texas 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 Alliant Energy and Entergy Texas into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Alliant Energy Corp and Entergy Texas, you can compare the effects of market volatilities on Alliant Energy and Entergy Texas 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 Alliant Energy with a short position of Entergy Texas. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alliant Energy and Entergy Texas.

Diversification Opportunities for Alliant Energy and Entergy Texas

-0.25

Correlation Coefficient

Alliant Energy  Entergy Texas

Very good diversification

The 3 months correlation between Alliant and Entergy is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding Alliant Energy Corp and Entergy Texas in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Entergy Texas and Alliant 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 Alliant Energy Corp are associated (or correlated) with Entergy Texas. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Entergy Texas has no effect on the direction of Alliant Energy i.e., Alliant Energy and Entergy Texas go up and down completely randomly.

Pair Corralation between Alliant Energy and Entergy Texas

Considering the 90-day investment horizon Alliant Energy Corp is expected to generate 2.05 times more return on investment than Entergy Texas. However, Alliant Energy is 2.05 times more volatile than Entergy Texas. It trades about 0.06 of its potential returns per unit of risk. Entergy Texas is currently generating about -0.29 per unit of risk. If you would invest  5,085  in Alliant Energy Corp on March 3, 2024 and sell it today you would earn a total of  64.00  from holding Alliant Energy Corp or generate 1.26% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Alliant Energy Corp  vs.  Entergy Texas

Alliant Energy Corp

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Alliant Energy Corp are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, Alliant Energy may actually be approaching a critical reversion point that can send shares even higher in July 2024.

Entergy Texas

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Entergy Texas has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Entergy Texas is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Alliant Energy and Entergy Texas

The main advantage of trading using opposite Alliant Energy and Entergy Texas positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Alliant Energy position performs unexpectedly, Entergy Texas 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 Entergy Texas will offset losses from the drop in Entergy Texas' long position.

The idea behind Alliant Energy Corp and Entergy Texas 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.