Correlation Between Montauk Renewables and Allete

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

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

Diversification Opportunities for Montauk Renewables and Allete

-0.02

Correlation Coefficient

Montauk Renewables  Allete

Good diversification

The 3 months correlation between Montauk and Allete is -0.02. Overlapping area represents the amount of risk that can be diversified away by holding Montauk Renewables and Allete Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Allete Inc and Montauk Renewables 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 Montauk Renewables are associated (or correlated) with Allete. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Allete Inc has no effect on the direction of Montauk Renewables i.e., Montauk Renewables and Allete go up and down completely randomly.

Pair Corralation between Montauk Renewables and Allete

Given the investment horizon of 90 days Montauk Renewables is expected to under-perform the Allete. In addition to that, Montauk Renewables is 12.84 times more volatile than Allete Inc. It trades about 0.0 of its total potential returns per unit of risk. Allete Inc is currently generating about 0.16 per unit of volatility. If you would invest  6,286  in Allete Inc on August 30, 2024 and sell it today you would earn a total of  202.00  from holding Allete Inc or generate 3.21% return on investment over 90 days.

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

Montauk Renewables  vs.  Allete Inc

Montauk Renewables

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Montauk Renewables has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, Montauk Renewables is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

Allete Inc

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Allete Inc are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound essential indicators, Allete is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Montauk Renewables and Allete

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

The idea behind Montauk Renewables and Allete Inc 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 Anywhere module to track or share privately all of your investments from the convenience of any device.