Correlation Between Entergy and Wisconsin Electric

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

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

Diversification Opportunities for Entergy and Wisconsin Electric

0.13

Correlation Coefficient

Entergy  Wisconsin Electric

Average diversification

The 3 months correlation between Entergy and Wisconsin is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding Entergy and Wisconsin Electric Power in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wisconsin Electric Power and Entergy 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 Entergy are associated (or correlated) with Wisconsin Electric. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wisconsin Electric Power has no effect on the direction of Entergy i.e., Entergy and Wisconsin Electric go up and down completely randomly.

Pair Corralation between Entergy and Wisconsin Electric

Considering the 90-day investment horizon Entergy is expected to generate 1.15 times more return on investment than Wisconsin Electric. However, Entergy is 1.15 times more volatile than Wisconsin Electric Power. It trades about 0.13 of its potential returns per unit of risk. Wisconsin Electric Power is currently generating about 0.02 per unit of risk. If you would invest  7,488  in Entergy on December 21, 2024 and sell it today you would earn a total of  976.00  from holding Entergy or generate 13.03% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.33%
Values	Daily Returns

Entergy  vs.  Wisconsin Electric Power

Entergy

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Entergy are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Even with relatively uncertain basic indicators, Entergy reported solid returns over the last few months and may actually be approaching a breakup point.

Wisconsin Electric Power

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Wisconsin Electric Power are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable basic indicators, Wisconsin Electric 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 Entergy and Wisconsin Electric

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

The idea behind Entergy and Wisconsin Electric Power 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.

Check out your portfolio center.

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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.