Correlation Between Alliant Energy and Freedom Bank

Can any of the company-specific risk be diversified away by investing in both Alliant Energy and Freedom Bank 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 Freedom Bank 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 Freedom Bank of, you can compare the effects of market volatilities on Alliant Energy and Freedom Bank 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 Freedom Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alliant Energy and Freedom Bank.

Diversification Opportunities for Alliant Energy and Freedom Bank

-0.05

Correlation Coefficient

Alliant Energy  Freedom Bank

Good diversification

The 3 months correlation between Alliant and Freedom is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding Alliant Energy Corp and Freedom Bank of in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Freedom Bank 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 Freedom Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Freedom Bank has no effect on the direction of Alliant Energy i.e., Alliant Energy and Freedom Bank go up and down completely randomly.

Pair Corralation between Alliant Energy and Freedom Bank

Considering the 90-day investment horizon Alliant Energy Corp is expected to under-perform the Freedom Bank. But the stock apears to be less risky and, when comparing its historical volatility, Alliant Energy Corp is 1.22 times less risky than Freedom Bank. The stock trades about -0.4 of its potential returns per unit of risk. The Freedom Bank of is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  1,056  in Freedom Bank of on September 21, 2024 and sell it today you would earn a total of  19.00  from holding Freedom Bank of or generate 1.8% return on investment over 90 days.

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

Alliant Energy Corp  vs.  Freedom Bank of

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.

Freedom Bank

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Alliant Energy and Freedom Bank

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

The idea behind Alliant Energy Corp and Freedom Bank of 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.