Correlation Between Consumers Energy and Avangrid

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

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

Diversification Opportunities for Consumers Energy and Avangrid

-0.57

Correlation Coefficient

Consumers Energy  Avangrid

Excellent diversification

The 3 months correlation between Consumers and Avangrid is -0.57. Overlapping area represents the amount of risk that can be diversified away by holding Consumers Energy and Avangrid in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Avangrid and Consumers 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 Consumers Energy are associated (or correlated) with Avangrid. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Avangrid has no effect on the direction of Consumers Energy i.e., Consumers Energy and Avangrid go up and down completely randomly.

Pair Corralation between Consumers Energy and Avangrid

Assuming the 90 days trading horizon Consumers Energy is expected to under-perform the Avangrid. In addition to that, Consumers Energy is 2.29 times more volatile than Avangrid. It trades about -0.15 of its total potential returns per unit of risk. Avangrid is currently generating about 0.14 per unit of volatility. If you would invest  3,532  in Avangrid on September 15, 2024 and sell it today you would earn a total of  27.00  from holding Avangrid or generate 0.76% return on investment over 90 days.

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

Consumers Energy  vs.  Avangrid

Consumers Energy

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Consumers Energy has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Consumers Energy is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Avangrid

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Avangrid are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable technical and fundamental indicators, Avangrid is not utilizing all of its potentials. The newest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Consumers Energy and Avangrid

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

The idea behind Consumers Energy and Avangrid 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.