Correlation Between LIFENET INSURANCE and American Electric
Can any of the company-specific risk be diversified away by investing in both LIFENET INSURANCE and American Electric 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 LIFENET INSURANCE and American Electric into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between LIFENET INSURANCE CO and American Electric Power, you can compare the effects of market volatilities on LIFENET INSURANCE and American Electric 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 LIFENET INSURANCE with a short position of American Electric. Check out your portfolio center. Please also check ongoing floating volatility patterns of LIFENET INSURANCE and American Electric.
Diversification Opportunities for LIFENET INSURANCE and American Electric
-0.02 | Correlation Coefficient |
Good diversification
The 3 months correlation between LIFENET and American is -0.02. Overlapping area represents the amount of risk that can be diversified away by holding LIFENET INSURANCE CO and American Electric Power in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Electric Power and LIFENET INSURANCE 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 LIFENET INSURANCE CO are associated (or correlated) with American Electric. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Electric Power has no effect on the direction of LIFENET INSURANCE i.e., LIFENET INSURANCE and American Electric go up and down completely randomly.
Pair Corralation between LIFENET INSURANCE and American Electric
Assuming the 90 days horizon LIFENET INSURANCE CO is expected to generate 2.16 times more return on investment than American Electric. However, LIFENET INSURANCE is 2.16 times more volatile than American Electric Power. It trades about 0.04 of its potential returns per unit of risk. American Electric Power is currently generating about 0.03 per unit of risk. If you would invest 805.00 in LIFENET INSURANCE CO on August 31, 2024 and sell it today you would earn a total of 375.00 from holding LIFENET INSURANCE CO or generate 46.58% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 99.79% |
| Values | Daily Returns |
LIFENET INSURANCE CO vs. American Electric Power
Performance |
| Timeline |
| LIFENET INSURANCE |
| American Electric Power |
LIFENET INSURANCE and American Electric Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with LIFENET INSURANCE and American Electric
The main advantage of trading using opposite LIFENET INSURANCE and American Electric positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LIFENET INSURANCE position performs unexpectedly, American Electric 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 American Electric will offset losses from the drop in American Electric's long position.| LIFENET INSURANCE vs. ONWARD MEDICAL BV | LIFENET INSURANCE vs. CHINA TONTINE WINES | LIFENET INSURANCE vs. ITALIAN WINE BRANDS | LIFENET INSURANCE vs. MELIA HOTELS |
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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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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