Correlation Between Avangrid and Ameren Corp
Can any of the company-specific risk be diversified away by investing in both Avangrid 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 Avangrid and Ameren Corp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Avangrid and Ameren Corp, you can compare the effects of market volatilities on Avangrid 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 Avangrid with a short position of Ameren Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Avangrid and Ameren Corp.
Diversification Opportunities for Avangrid and Ameren Corp
0.88 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Avangrid and Ameren is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Avangrid and Ameren Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ameren Corp and Avangrid 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 Avangrid 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 Avangrid i.e., Avangrid and Ameren Corp go up and down completely randomly.
Pair Corralation between Avangrid and Ameren Corp
Considering the 90-day investment horizon Avangrid is expected to generate 0.48 times more return on investment than Ameren Corp. However, Avangrid is 2.06 times less risky than Ameren Corp. It trades about 0.09 of its potential returns per unit of risk. Ameren Corp is currently generating about 0.03 per unit of risk. If you would invest 3,585 in Avangrid on January 20, 2024 and sell it today you would earn a total of 39.00 from holding Avangrid or generate 1.09% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Avangrid vs. Ameren Corp
Performance |
| Timeline |
| Avangrid |
| Ameren Corp |
Avangrid and Ameren Corp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Avangrid and Ameren Corp
The main advantage of trading using opposite Avangrid and Ameren Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Avangrid 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 Avangrid 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.| Ameren Corp vs. American Electric Power | Ameren Corp vs. Nextera Energy | Ameren Corp vs. Aquagold International | Ameren Corp vs. Morningstar Unconstrained Allocation |
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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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