Correlation Between MGE Energy and Montauk Renewables
Can any of the company-specific risk be diversified away by investing in both MGE Energy and Montauk Renewables 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 MGE Energy and Montauk Renewables into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between MGE Energy and Montauk Renewables, you can compare the effects of market volatilities on MGE Energy and Montauk Renewables 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 MGE Energy with a short position of Montauk Renewables. Check out your portfolio center. Please also check ongoing floating volatility patterns of MGE Energy and Montauk Renewables.
Diversification Opportunities for MGE Energy and Montauk Renewables
-0.79 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between MGE and Montauk is -0.79. Overlapping area represents the amount of risk that can be diversified away by holding MGE Energy and Montauk Renewables in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Montauk Renewables and MGE 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 MGE Energy are associated (or correlated) with Montauk Renewables. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Montauk Renewables has no effect on the direction of MGE Energy i.e., MGE Energy and Montauk Renewables go up and down completely randomly.
Pair Corralation between MGE Energy and Montauk Renewables
Given the investment horizon of 90 days MGE Energy is expected to generate 0.33 times more return on investment than Montauk Renewables. However, MGE Energy is 3.03 times less risky than Montauk Renewables. It trades about 0.05 of its potential returns per unit of risk. Montauk Renewables is currently generating about -0.01 per unit of risk. If you would invest 7,725 in MGE Energy on January 25, 2024 and sell it today you would earn a total of 96.00 from holding MGE Energy or generate 1.24% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Weak |
Accuracy | 100.0% |
Values | Daily Returns |
MGE Energy vs. Montauk Renewables
Performance |
Timeline |
MGE Energy |
Montauk Renewables |
MGE Energy and Montauk Renewables Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with MGE Energy and Montauk Renewables
The main advantage of trading using opposite MGE Energy and Montauk Renewables positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MGE Energy position performs unexpectedly, Montauk Renewables 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 Montauk Renewables will offset losses from the drop in Montauk Renewables' long position.MGE Energy vs. CMS Energy | MGE Energy vs. Ameren Corp | MGE Energy vs. Pinnacle West Capital | MGE Energy vs. Evergy Common Stock |
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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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