Correlation Between Allete and Boralex

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

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

Diversification Opportunities for Allete and Boralex

-0.31

Correlation Coefficient

Allete  Boralex

Very good diversification

The 3 months correlation between Allete and Boralex is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding Allete Inc and Boralex in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Boralex and Allete 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 Allete Inc are associated (or correlated) with Boralex. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Boralex has no effect on the direction of Allete i.e., Allete and Boralex go up and down completely randomly.

Pair Corralation between Allete and Boralex

Considering the 90-day investment horizon Allete Inc is expected to generate 0.55 times more return on investment than Boralex. However, Allete Inc is 1.82 times less risky than Boralex. It trades about 0.27 of its potential returns per unit of risk. Boralex is currently generating about 0.14 per unit of risk. If you would invest  5,778  in Allete Inc on February 14, 2024 and sell it today you would earn a total of  516.00  from holding Allete Inc or generate 8.93% return on investment over 90 days.

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

Allete Inc  vs.  Boralex

Allete Inc

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Allete Inc are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak essential indicators, Allete may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Boralex

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Boralex has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Boralex is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Allete and Boralex

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

The idea behind Allete Inc and Boralex 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.

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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.