Correlation Between Cromwell Property and Ameren Illinois

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

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

Diversification Opportunities for Cromwell Property and Ameren Illinois

-0.78

Correlation Coefficient

Cromwell Property  Ameren Illinois

Pay attention - limited upside

The 3 months correlation between Cromwell and Ameren is -0.78. Overlapping area represents the amount of risk that can be diversified away by holding Cromwell Property Group and Ameren Illinois in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ameren Illinois and Cromwell Property 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 Cromwell Property Group are associated (or correlated) with Ameren Illinois. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ameren Illinois has no effect on the direction of Cromwell Property i.e., Cromwell Property and Ameren Illinois go up and down completely randomly.

Pair Corralation between Cromwell Property and Ameren Illinois

Assuming the 90 days horizon Cromwell Property Group is expected to generate 0.57 times more return on investment than Ameren Illinois. However, Cromwell Property Group is 1.74 times less risky than Ameren Illinois. It trades about 0.13 of its potential returns per unit of risk. Ameren Illinois is currently generating about -0.08 per unit of risk. If you would invest  27.00  in Cromwell Property Group on October 26, 2024 and sell it today you would earn a total of  1.00  from holding Cromwell Property Group or generate 3.7% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	93.65%
Values	Daily Returns

Cromwell Property Group  vs.  Ameren Illinois

Cromwell Property

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Cromwell Property Group are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable fundamental indicators, Cromwell Property is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Ameren Illinois

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ameren Illinois has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy essential indicators, Ameren Illinois is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Cromwell Property and Ameren Illinois

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

The idea behind Cromwell Property Group and Ameren Illinois 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.