Correlation Between American Electric and Solstad Offshore
Can any of the company-specific risk be diversified away by investing in both American Electric and Solstad Offshore 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 Solstad Offshore 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 Solstad Offshore ASA, you can compare the effects of market volatilities on American Electric and Solstad Offshore 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 Solstad Offshore. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Electric and Solstad Offshore.
Diversification Opportunities for American Electric and Solstad Offshore
0.48 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between American and Solstad is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding American Electric Power and Solstad Offshore ASA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Solstad Offshore ASA 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 Solstad Offshore. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Solstad Offshore ASA has no effect on the direction of American Electric i.e., American Electric and Solstad Offshore go up and down completely randomly.
Pair Corralation between American Electric and Solstad Offshore
Assuming the 90 days trading horizon American Electric is expected to generate 201.59 times less return on investment than Solstad Offshore. But when comparing it to its historical volatility, American Electric Power is 5.33 times less risky than Solstad Offshore. It trades about 0.01 of its potential returns per unit of risk. Solstad Offshore ASA is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest 263.00 in Solstad Offshore ASA on September 15, 2024 and sell it today you would earn a total of 61.00 from holding Solstad Offshore ASA or generate 23.19% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 95.65% |
| Values | Daily Returns |
American Electric Power vs. Solstad Offshore ASA
Performance |
| Timeline |
| American Electric Power |
| Solstad Offshore ASA |
American Electric and Solstad Offshore Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Electric and Solstad Offshore
The main advantage of trading using opposite American Electric and Solstad Offshore positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Electric position performs unexpectedly, Solstad Offshore 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 Solstad Offshore will offset losses from the drop in Solstad Offshore's long position.| American Electric vs. ETFS Coffee ETC | American Electric vs. Salesforce | American Electric vs. MUTUIONLINE | American Electric vs. Natural Health Trends |
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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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.
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