Correlation Between Duke Energy and Ameren Corp

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

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

Diversification Opportunities for Duke Energy and Ameren Corp

0.55

Correlation Coefficient

Duke Energy  Ameren Corp

Very weak diversification

The 3 months correlation between Duke and Ameren is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Duke Energy and Ameren Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ameren Corp and Duke 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 Duke Energy 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 Duke Energy i.e., Duke Energy and Ameren Corp go up and down completely randomly.

Pair Corralation between Duke Energy and Ameren Corp

Considering the 90-day investment horizon Duke Energy is expected to generate 1.19 times less return on investment than Ameren Corp. But when comparing it to its historical volatility, Duke Energy is 1.13 times less risky than Ameren Corp. It trades about 0.03 of its potential returns per unit of risk. Ameren Corp is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  7,205  in Ameren Corp on January 20, 2024 and sell it today you would earn a total of  46.00  from holding Ameren Corp or generate 0.64% return on investment over 90 days.

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

Duke Energy  vs.  Ameren Corp

Duke Energy

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Duke Energy are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent basic indicators, Duke Energy is not utilizing all of its potentials. The newest stock price mess, may contribute to short-term losses for the institutional investors.

Ameren Corp

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Ameren Corp are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak technical and fundamental indicators, Ameren Corp may actually be approaching a critical reversion point that can send shares even higher in May 2024.

Pair Trading with Duke Energy and Ameren Corp

The main advantage of trading using opposite Duke Energy and Ameren Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Duke Energy 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 Duke Energy 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.

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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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..