Correlation Between Cadiz Depositary and Allete

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

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

Diversification Opportunities for Cadiz Depositary and Allete

-0.38

Correlation Coefficient

Cadiz Depositary  Allete

Very good diversification

The 3 months correlation between Cadiz and Allete is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding Cadiz Depositary Shares and Allete Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Allete Inc and Cadiz Depositary 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 Cadiz Depositary Shares are associated (or correlated) with Allete. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Allete Inc has no effect on the direction of Cadiz Depositary i.e., Cadiz Depositary and Allete go up and down completely randomly.

Pair Corralation between Cadiz Depositary and Allete

If you would invest  5,897  in Allete Inc on March 1, 2024 and sell it today you would earn a total of  376.00  from holding Allete Inc or generate 6.38% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	2.33%
Values	Daily Returns

Cadiz Depositary Shares  vs.  Allete Inc

Cadiz Depositary Shares

Risk-Adjusted Performance

0 of 100

Very Weak

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

Allete Inc

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Allete Inc are ranked lower than 12 (%) 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.

Pair Trading with Cadiz Depositary and Allete

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

The idea behind Cadiz Depositary Shares and Allete Inc 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.