Correlation Between Duke Energy and Alliant Energy

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

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

Diversification Opportunities for Duke Energy and Alliant Energy

0.45

Correlation Coefficient

Duke Energy  Alliant Energy

Very weak diversification

The 3 months correlation between Duke and Alliant is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Duke Energy and Alliant Energy Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alliant Energy Corp and Duke 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 Duke Energy are associated (or correlated) with Alliant Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alliant Energy Corp has no effect on the direction of Duke Energy i.e., Duke Energy and Alliant Energy go up and down completely randomly.

Pair Corralation between Duke Energy and Alliant Energy

Considering the 90-day investment horizon Duke Energy is expected to under-perform the Alliant Energy. In addition to that, Duke Energy is 1.35 times more volatile than Alliant Energy Corp. It trades about -0.24 of its total potential returns per unit of risk. Alliant Energy Corp is currently generating about -0.17 per unit of volatility. If you would invest  6,181  in Alliant Energy Corp on September 17, 2024 and sell it today you would lose (136.00) from holding Alliant Energy Corp or give up 2.2% of portfolio value over 90 days.

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

Duke Energy  vs.  Alliant Energy Corp

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 quite persistent basic indicators, Duke Energy is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

Alliant Energy Corp

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Alliant Energy Corp are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Alliant Energy is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Duke Energy and Alliant Energy

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

The idea behind Duke Energy and Alliant Energy Corp 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.