Correlation Between IDACORP and Consumers Energy

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

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

Diversification Opportunities for IDACORP and Consumers Energy

0.74

Correlation Coefficient

IDACORP  Consumers Energy

Poor diversification

The 3 months correlation between IDACORP and Consumers is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding IDACORP and Consumers Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Consumers Energy and IDACORP 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 IDACORP are associated (or correlated) with Consumers Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Consumers Energy has no effect on the direction of IDACORP i.e., IDACORP and Consumers Energy go up and down completely randomly.

Pair Corralation between IDACORP and Consumers Energy

Considering the 90-day investment horizon IDACORP is expected to generate 0.87 times more return on investment than Consumers Energy. However, IDACORP is 1.14 times less risky than Consumers Energy. It trades about 0.08 of its potential returns per unit of risk. Consumers Energy is currently generating about 0.06 per unit of risk. If you would invest  10,864  in IDACORP on December 30, 2024 and sell it today you would earn a total of  630.00  from holding IDACORP or generate 5.8% return on investment over 90 days.

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

IDACORP  vs.  Consumers Energy

IDACORP

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in IDACORP are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong fundamental indicators, IDACORP is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Consumers Energy

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Consumers Energy are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. 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.

Pair Trading with IDACORP and Consumers Energy

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

The idea behind IDACORP and Consumers Energy 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.