Correlation Between Ameren Corp and Vanguard Utilities

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

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

Diversification Opportunities for Ameren Corp and Vanguard Utilities

0.77

Correlation Coefficient

Ameren Corp  Vanguard Utilities

Poor diversification

The 3 months correlation between Ameren and Vanguard is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Ameren Corp and Vanguard Utilities Index in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Utilities Index and Ameren Corp 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 Ameren Corp are associated (or correlated) with Vanguard Utilities. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Utilities Index has no effect on the direction of Ameren Corp i.e., Ameren Corp and Vanguard Utilities go up and down completely randomly.

Pair Corralation between Ameren Corp and Vanguard Utilities

Considering the 90-day investment horizon Ameren Corp is expected to generate 1.13 times more return on investment than Vanguard Utilities. However, Ameren Corp is 1.13 times more volatile than Vanguard Utilities Index. It trades about 0.21 of its potential returns per unit of risk. Vanguard Utilities Index is currently generating about 0.15 per unit of risk. If you would invest  8,262  in Ameren Corp on August 31, 2024 and sell it today you would earn a total of  1,236  from holding Ameren Corp or generate 14.96% return on investment over 90 days.

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

Ameren Corp  vs.  Vanguard Utilities Index

Ameren Corp

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Ameren Corp are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical and fundamental indicators, Ameren Corp exhibited solid returns over the last few months and may actually be approaching a breakup point.

Vanguard Utilities Index

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Utilities Index are ranked lower than 11 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Vanguard Utilities may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with Ameren Corp and Vanguard Utilities

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

The idea behind Ameren Corp and Vanguard Utilities Index 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 CEOs Directory module to screen CEOs from public companies around the world.