Correlation Between WEC Energy and Antero Midstream

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

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

Diversification Opportunities for WEC Energy and Antero Midstream

0.66

Correlation Coefficient

WEC Energy  Antero Midstream

Poor diversification

The 3 months correlation between WEC and Antero is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding WEC Energy Group and Antero Midstream Partners in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Antero Midstream Partners and WEC 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 WEC Energy Group are associated (or correlated) with Antero Midstream. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Antero Midstream Partners has no effect on the direction of WEC Energy i.e., WEC Energy and Antero Midstream go up and down completely randomly.

Pair Corralation between WEC Energy and Antero Midstream

Considering the 90-day investment horizon WEC Energy is expected to generate 1.63 times less return on investment than Antero Midstream. But when comparing it to its historical volatility, WEC Energy Group is 1.38 times less risky than Antero Midstream. It trades about 0.32 of its potential returns per unit of risk. Antero Midstream Partners is currently generating about 0.38 of returns per unit of risk over similar time horizon. If you would invest  1,438  in Antero Midstream Partners on September 2, 2024 and sell it today you would earn a total of  159.00  from holding Antero Midstream Partners or generate 11.06% return on investment over 90 days.

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

WEC Energy Group  vs.  Antero Midstream Partners

WEC Energy Group

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in WEC Energy Group are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical and fundamental indicators, WEC Energy may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Antero Midstream Partners

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Antero Midstream Partners are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of very unsteady primary indicators, Antero Midstream may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with WEC Energy and Antero Midstream

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

The idea behind WEC Energy Group and Antero Midstream Partners 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..