Correlation Between Avangrid and Ameren Illinois

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

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

Diversification Opportunities for Avangrid and Ameren Illinois

-0.48

Correlation Coefficient

Avangrid  Ameren Illinois

Very good diversification

The 3 months correlation between Avangrid and Ameren is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding Avangrid and Ameren Illinois in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ameren Illinois and Avangrid 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 Avangrid 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 Avangrid i.e., Avangrid and Ameren Illinois go up and down completely randomly.

Pair Corralation between Avangrid and Ameren Illinois

If you would invest  3,602  in Avangrid on October 22, 2024 and sell it today you would earn a total of  0.00  from holding Avangrid or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	35.71%
Values	Daily Returns

Avangrid  vs.  Ameren Illinois

Avangrid

Risk-Adjusted Performance

0 of 100

Good

Over the last 90 days Avangrid has generated negative risk-adjusted returns adding no value to investors with long positions. 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.

Ameren Illinois

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ameren Illinois has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy essential indicators, Ameren Illinois is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Avangrid and Ameren Illinois

The main advantage of trading using opposite Avangrid and Ameren Illinois positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Avangrid 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.

The idea behind Avangrid and Ameren Illinois 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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.