Correlation Between Allete and AuraSource

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

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

Diversification Opportunities for Allete and AuraSource

-0.67

Correlation Coefficient

Allete  AuraSource

Excellent diversification

The 3 months correlation between Allete and AuraSource is -0.67. Overlapping area represents the amount of risk that can be diversified away by holding Allete Inc and AuraSource in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AuraSource and Allete 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 Allete Inc are associated (or correlated) with AuraSource. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AuraSource has no effect on the direction of Allete i.e., Allete and AuraSource go up and down completely randomly.

Pair Corralation between Allete and AuraSource

Considering the 90-day investment horizon Allete Inc is expected to generate 0.02 times more return on investment than AuraSource. However, Allete Inc is 55.58 times less risky than AuraSource. It trades about 0.17 of its potential returns per unit of risk. AuraSource is currently generating about -0.18 per unit of risk. If you would invest  6,267  in Allete Inc on September 2, 2024 and sell it today you would earn a total of  221.00  from holding Allete Inc or generate 3.53% return on investment over 90 days.

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

Allete Inc  vs.  AuraSource

Allete Inc

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Allete Inc are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound essential indicators, Allete is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

AuraSource

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days AuraSource has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in January 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Allete and AuraSource

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

The idea behind Allete Inc and AuraSource 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 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.