Correlation Between Consumers Energy and Atco

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

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

Diversification Opportunities for Consumers Energy and Atco

0.72

Correlation Coefficient

Consumers Energy  Atco

Poor diversification

The 3 months correlation between Consumers and Atco is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Consumers Energy and Atco in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Atco and Consumers Energy 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 Consumers Energy are associated (or correlated) with Atco. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Atco has no effect on the direction of Consumers Energy i.e., Consumers Energy and Atco go up and down completely randomly.

Pair Corralation between Consumers Energy and Atco

Assuming the 90 days trading horizon Consumers Energy is expected to generate 1.14 times more return on investment than Atco. However, Consumers Energy is 1.14 times more volatile than Atco. It trades about -0.01 of its potential returns per unit of risk. Atco is currently generating about -0.01 per unit of risk. If you would invest  8,068  in Consumers Energy on November 29, 2024 and sell it today you would lose (78.00) from holding Consumers Energy or give up 0.97% of portfolio value over 90 days.

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

Consumers Energy  vs.  Atco

Consumers Energy

Risk-Adjusted Performance

Very Weak

Over the last 90 days Consumers Energy has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Consumers Energy is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Atco

Risk-Adjusted Performance

Very Weak

Over the last 90 days Atco has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable essential indicators, Atco is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Consumers Energy and Atco

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

The idea behind Consumers Energy and Atco 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.