Correlation Between Antero Midstream and WEC Energy

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

By analyzing existing cross correlation between Antero Midstream Partners and WEC Energy Group, you can compare the effects of market volatilities on Antero Midstream and WEC Energy 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 Antero Midstream with a short position of WEC Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Antero Midstream and WEC Energy.

Diversification Opportunities for Antero Midstream and WEC Energy

0.84

Correlation Coefficient

Antero Midstream  WEC Energy

Very poor diversification

The 3 months correlation between Antero and WEC is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Antero Midstream Partners and WEC Energy Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WEC Energy Group and Antero Midstream 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 Antero Midstream Partners are associated (or correlated) with WEC Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WEC Energy Group has no effect on the direction of Antero Midstream i.e., Antero Midstream and WEC Energy go up and down completely randomly.

Pair Corralation between Antero Midstream and WEC Energy

Allowing for the 90-day total investment horizon Antero Midstream Partners is expected to generate 1.33 times more return on investment than WEC Energy. However, Antero Midstream is 1.33 times more volatile than WEC Energy Group. It trades about 0.19 of its potential returns per unit of risk. WEC Energy Group is currently generating about 0.14 per unit of risk. If you would invest  1,493  in Antero Midstream Partners on December 26, 2024 and sell it today you would earn a total of  306.00  from holding Antero Midstream Partners or generate 20.5% return on investment over 90 days.

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

Antero Midstream Partners  vs.  WEC Energy Group

Antero Midstream Partners

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Antero Midstream Partners are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of very unsteady primary indicators, Antero Midstream displayed solid returns over the last few months and may actually be approaching a breakup point.

WEC Energy Group

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in WEC Energy Group are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical and fundamental indicators, WEC Energy may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Antero Midstream and WEC Energy

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

The idea behind Antero Midstream Partners and WEC Energy Group 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 Transaction History module to view history of all your transactions and understand their impact on performance.