Correlation Between American Electric and Singapore Reinsurance
Can any of the company-specific risk be diversified away by investing in both American Electric and Singapore Reinsurance 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 Singapore Reinsurance 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 Singapore Reinsurance, you can compare the effects of market volatilities on American Electric and Singapore Reinsurance 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 Singapore Reinsurance. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Electric and Singapore Reinsurance.
Diversification Opportunities for American Electric and Singapore Reinsurance
0.11 | Correlation Coefficient |
Average diversification
The 3 months correlation between American and Singapore is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding American Electric Power and Singapore Reinsurance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Singapore Reinsurance 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 Singapore Reinsurance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Singapore Reinsurance has no effect on the direction of American Electric i.e., American Electric and Singapore Reinsurance go up and down completely randomly.
Pair Corralation between American Electric and Singapore Reinsurance
Assuming the 90 days trading horizon American Electric is expected to generate 1.44 times less return on investment than Singapore Reinsurance. But when comparing it to its historical volatility, American Electric Power is 2.05 times less risky than Singapore Reinsurance. It trades about 0.1 of its potential returns per unit of risk. Singapore Reinsurance is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 2,440 in Singapore Reinsurance on September 2, 2024 and sell it today you would earn a total of 1,040 from holding Singapore Reinsurance or generate 42.62% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
American Electric Power vs. Singapore Reinsurance
Performance |
| Timeline |
| American Electric Power |
| Singapore Reinsurance |
American Electric and Singapore Reinsurance Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Electric and Singapore Reinsurance
The main advantage of trading using opposite American Electric and Singapore Reinsurance positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Electric position performs unexpectedly, Singapore Reinsurance 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 Singapore Reinsurance will offset losses from the drop in Singapore Reinsurance's long position.| American Electric vs. SIVERS SEMICONDUCTORS AB | American Electric vs. Darden Restaurants | American Electric vs. Reliance Steel Aluminum | American Electric vs. Q2M Managementberatung AG |
| Singapore Reinsurance vs. SIVERS SEMICONDUCTORS AB | Singapore Reinsurance vs. Darden Restaurants | Singapore Reinsurance vs. Reliance Steel Aluminum | Singapore Reinsurance vs. Q2M Managementberatung AG |
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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.
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