Correlation Between Allete and Entergy Mississippi

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

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

Diversification Opportunities for Allete and Entergy Mississippi

-0.49

Correlation Coefficient

Allete  Entergy Mississippi

Very good diversification

The 3 months correlation between Allete and Entergy is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding Allete Inc and Entergy Mississippi LLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Entergy Mississippi LLC 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 Entergy Mississippi. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Entergy Mississippi LLC has no effect on the direction of Allete i.e., Allete and Entergy Mississippi go up and down completely randomly.

Pair Corralation between Allete and Entergy Mississippi

Considering the 90-day investment horizon Allete is expected to generate 1.52 times less return on investment than Entergy Mississippi. In addition to that, Allete is 1.33 times more volatile than Entergy Mississippi LLC. It trades about 0.02 of its total potential returns per unit of risk. Entergy Mississippi LLC is currently generating about 0.04 per unit of volatility. If you would invest  1,857  in Entergy Mississippi LLC on October 9, 2024 and sell it today you would earn a total of  369.01  from holding Entergy Mississippi LLC or generate 19.87% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	99.8%
Values	Daily Returns

Allete Inc  vs.  Entergy Mississippi LLC

Allete Inc

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Allete Inc are ranked lower than 9 (%) 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.

Entergy Mississippi LLC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Entergy Mississippi LLC has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable primary indicators, Entergy Mississippi is not utilizing all of its potentials. The recent stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Allete and Entergy Mississippi

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

The idea behind Allete Inc and Entergy Mississippi LLC 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 Stocks Directory module to find actively traded stocks across global markets.