Correlation Between American Electric and Cornish Metals
Can any of the company-specific risk be diversified away by investing in both American Electric and Cornish Metals 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 American Electric and Cornish Metals into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between American Electric Power and Cornish Metals, you can compare the effects of market volatilities on American Electric and Cornish Metals 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 American Electric with a short position of Cornish Metals. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Electric and Cornish Metals.
Diversification Opportunities for American Electric and Cornish Metals
-0.59 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between American and Cornish is -0.59. Overlapping area represents the amount of risk that can be diversified away by holding American Electric Power and Cornish Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cornish Metals and American Electric 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 American Electric Power are associated (or correlated) with Cornish Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cornish Metals has no effect on the direction of American Electric i.e., American Electric and Cornish Metals go up and down completely randomly.
Pair Corralation between American Electric and Cornish Metals
Assuming the 90 days trading horizon American Electric is expected to generate 1.47 times less return on investment than Cornish Metals. But when comparing it to its historical volatility, American Electric Power is 3.69 times less risky than Cornish Metals. It trades about 0.1 of its potential returns per unit of risk. Cornish Metals is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 760.00 in Cornish Metals on September 1, 2024 and sell it today you would earn a total of 90.00 from holding Cornish Metals or generate 11.84% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
American Electric Power vs. Cornish Metals
Performance |
| Timeline |
| American Electric Power |
| Cornish Metals |
American Electric and Cornish Metals Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Electric and Cornish Metals
The main advantage of trading using opposite American Electric and Cornish Metals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Electric position performs unexpectedly, Cornish Metals 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 Cornish Metals will offset losses from the drop in Cornish Metals' long position.| American Electric vs. Team Internet Group | American Electric vs. Gamma Communications PLC | American Electric vs. Southern Copper Corp | American Electric vs. McEwen Mining |
| Cornish Metals vs. United Internet AG | Cornish Metals vs. Verizon Communications | Cornish Metals vs. Fulcrum Metals PLC | Cornish Metals vs. Power Metal Resources |
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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.
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