Correlation Between PGE Corp and Ameren Illinois

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

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

Diversification Opportunities for PGE Corp and Ameren Illinois

0.41

Correlation Coefficient

PGE Corp  Ameren Illinois

Very weak diversification

The 3 months correlation between PGE and Ameren is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding PGE Corp and Ameren Illinois in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ameren Illinois and PGE Corp 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 PGE Corp 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 PGE Corp i.e., PGE Corp and Ameren Illinois go up and down completely randomly.

Pair Corralation between PGE Corp and Ameren Illinois

Considering the 90-day investment horizon PGE Corp is expected to under-perform the Ameren Illinois. In addition to that, PGE Corp is 1.44 times more volatile than Ameren Illinois. It trades about -0.02 of its total potential returns per unit of risk. Ameren Illinois is currently generating about -0.02 per unit of volatility. If you would invest  8,200  in Ameren Illinois on October 21, 2024 and sell it today you would lose (295.00) from holding Ameren Illinois or give up 3.6% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	97.6%
Values	Daily Returns

PGE Corp  vs.  Ameren Illinois

PGE Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days PGE Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Stock's fundamental indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company 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 PGE Corp and Ameren Illinois

The main advantage of trading using opposite PGE Corp and Ameren Illinois positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PGE Corp 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 PGE Corp 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 Search module to search for actively traded equities including funds and ETFs from over 30 global markets.