Correlation Between Allete and Energy Of

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

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

Diversification Opportunities for Allete and Energy Of

0.45

Correlation Coefficient

Allete  Energy Of

Very weak diversification

The 3 months correlation between Allete and Energy is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Allete Inc and Energy of Minas in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Energy of Minas 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 Energy Of. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Energy of Minas has no effect on the direction of Allete i.e., Allete and Energy Of go up and down completely randomly.

Pair Corralation between Allete and Energy Of

Considering the 90-day investment horizon Allete is expected to generate 6.3 times less return on investment than Energy Of. But when comparing it to its historical volatility, Allete Inc is 8.53 times less risky than Energy Of. It trades about 0.23 of its potential returns per unit of risk. Energy of Minas is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  253.00  in Energy of Minas on November 29, 2024 and sell it today you would earn a total of  20.00  from holding Energy of Minas or generate 7.91% return on investment over 90 days.

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

Allete Inc  vs.  Energy of Minas

Allete Inc

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Allete Inc are ranked lower than 11 (%) 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.

Energy of Minas

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Energy of Minas are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile basic indicators, Energy Of exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Allete and Energy Of

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

The idea behind Allete Inc and Energy of Minas 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.