Correlation Between MGE Energy and Alliant Energy

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

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

Diversification Opportunities for MGE Energy and Alliant Energy

-0.53

Correlation Coefficient

MGE Energy  Alliant Energy

Excellent diversification

The 3 months correlation between MGE and Alliant is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding MGE Energy and Alliant Energy Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alliant Energy Corp 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 Alliant Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alliant Energy Corp has no effect on the direction of MGE Energy i.e., MGE Energy and Alliant Energy go up and down completely randomly.

Pair Corralation between MGE Energy and Alliant Energy

Given the investment horizon of 90 days MGE Energy is expected to under-perform the Alliant Energy. But the stock apears to be less risky and, when comparing its historical volatility, MGE Energy is 1.01 times less risky than Alliant Energy. The stock trades about -0.1 of its potential returns per unit of risk. The Alliant Energy Corp is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  6,132  in Alliant Energy Corp on May 7, 2025 and sell it today you would earn a total of  502.00  from holding Alliant Energy Corp or generate 8.19% return on investment over 90 days.

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

MGE Energy  vs.  Alliant Energy Corp

MGE Energy

Risk-Adjusted Performance

Very Weak

Over the last 90 days MGE Energy has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Alliant Energy Corp

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Alliant Energy Corp are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Alliant Energy may actually be approaching a critical reversion point that can send shares even higher in September 2025.

Pair Trading with MGE Energy and Alliant Energy

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

The idea behind MGE Energy and Alliant Energy 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.