Correlation Between Ameren Corp and PPL

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

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

Diversification Opportunities for Ameren Corp and PPL

0.93

Correlation Coefficient

Ameren Corp  PPL

Almost no diversification

The 3 months correlation between Ameren and PPL is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Ameren Corp and PPL Corp. in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PPL Corporation and Ameren Corp 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 Ameren Corp are associated (or correlated) with PPL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PPL Corporation has no effect on the direction of Ameren Corp i.e., Ameren Corp and PPL go up and down completely randomly.

Pair Corralation between Ameren Corp and PPL

Considering the 90-day investment horizon Ameren Corp is expected to generate 1.0 times more return on investment than PPL. However, Ameren Corp is 1.0 times more volatile than PPL Corporation. It trades about 0.13 of its potential returns per unit of risk. PPL Corporation is currently generating about 0.13 per unit of risk. If you would invest  7,019  in Ameren Corp on January 25, 2024 and sell it today you would earn a total of  383.00  from holding Ameren Corp or generate 5.46% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	100.0%
Values	Daily Returns

Ameren Corp  vs.  PPL Corp.

Ameren Corp

Risk-Adjusted Performance

8 of 100

OK

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

PPL Corporation

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in PPL Corporation are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite quite fragile basic indicators, PPL may actually be approaching a critical reversion point that can send shares even higher in May 2024.

Pair Trading with Ameren Corp and PPL

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

The idea behind Ameren Corp and PPL Corporation 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.