Correlation Between Caribbean Utilities and Ameren Illinois
Can any of the company-specific risk be diversified away by investing in both Caribbean Utilities and Ameren Illinois 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 Caribbean Utilities and Ameren Illinois into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Caribbean Utilities and Ameren Illinois, you can compare the effects of market volatilities on Caribbean Utilities and Ameren Illinois 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 Caribbean Utilities with a short position of Ameren Illinois. Check out your portfolio center. Please also check ongoing floating volatility patterns of Caribbean Utilities and Ameren Illinois.
Diversification Opportunities for Caribbean Utilities and Ameren Illinois
0.29 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Caribbean and Ameren is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Caribbean Utilities and Ameren Illinois in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ameren Illinois and Caribbean Utilities 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 Caribbean Utilities are associated (or correlated) with Ameren Illinois. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ameren Illinois has no effect on the direction of Caribbean Utilities i.e., Caribbean Utilities and Ameren Illinois go up and down completely randomly.
Pair Corralation between Caribbean Utilities and Ameren Illinois
Assuming the 90 days horizon Caribbean Utilities is expected to generate 1.55 times more return on investment than Ameren Illinois. However, Caribbean Utilities is 1.55 times more volatile than Ameren Illinois. It trades about 0.17 of its potential returns per unit of risk. Ameren Illinois is currently generating about -0.05 per unit of risk. If you would invest 1,279 in Caribbean Utilities on January 25, 2024 and sell it today you would earn a total of 92.00 from holding Caribbean Utilities or generate 7.19% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 95.45% |
| Values | Daily Returns |
Caribbean Utilities vs. Ameren Illinois
Performance |
| Timeline |
| Caribbean Utilities |
| Ameren Illinois |
Caribbean Utilities and Ameren Illinois Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Caribbean Utilities and Ameren Illinois
The main advantage of trading using opposite Caribbean Utilities and Ameren Illinois positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Caribbean Utilities position performs unexpectedly, Ameren Illinois 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 Illinois will offset losses from the drop in Ameren Illinois' long position.| Caribbean Utilities vs. Kontrol Technologies Corp | Caribbean Utilities vs. 808 Renewable Energy | Caribbean Utilities vs. Boralex | Caribbean Utilities vs. HUMANA INC |
| Ameren Illinois vs. Southern Company | Ameren Illinois vs. Duke Energy | Ameren Illinois vs. Duke Energy | Ameren Illinois vs. National Grid PLC |
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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.
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