Correlation Between Alliant Energy and Duke Energy

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

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

Diversification Opportunities for Alliant Energy and Duke Energy

0.53

Correlation Coefficient

Alliant Energy  Duke Energy

Very weak diversification

The 3 months correlation between Alliant and Duke is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Alliant Energy Corp and Duke Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Duke Energy and Alliant 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 Alliant Energy Corp are associated (or correlated) with Duke Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Duke Energy has no effect on the direction of Alliant Energy i.e., Alliant Energy and Duke Energy go up and down completely randomly.

Pair Corralation between Alliant Energy and Duke Energy

Considering the 90-day investment horizon Alliant Energy Corp is expected to under-perform the Duke Energy. But the stock apears to be less risky and, when comparing its historical volatility, Alliant Energy Corp is 1.39 times less risky than Duke Energy. The stock trades about -0.46 of its potential returns per unit of risk. The Duke Energy is currently generating about -0.26 of returns per unit of risk over similar time horizon. If you would invest  11,470  in Duke Energy on September 23, 2024 and sell it today you would lose (642.00) from holding Duke Energy or give up 5.6% of portfolio value over 90 days.

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

Alliant Energy Corp  vs.  Duke Energy

Alliant Energy Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Alliant Energy Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Alliant Energy is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Duke Energy

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Duke Energy has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unsteady performance, the Stock's basic indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Pair Trading with Alliant Energy and Duke Energy

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

The idea behind Alliant Energy Corp and Duke 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.