Correlation Between American Electric and Evolution Mining
Can any of the company-specific risk be diversified away by investing in both American Electric and Evolution Mining 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 Evolution Mining 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 Evolution Mining Limited, you can compare the effects of market volatilities on American Electric and Evolution Mining 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 Evolution Mining. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Electric and Evolution Mining.
Diversification Opportunities for American Electric and Evolution Mining
0.13 | Correlation Coefficient |
Average diversification
The 3 months correlation between American and Evolution is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding American Electric Power and Evolution Mining Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Evolution Mining 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 Evolution Mining. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Evolution Mining has no effect on the direction of American Electric i.e., American Electric and Evolution Mining go up and down completely randomly.
Pair Corralation between American Electric and Evolution Mining
Assuming the 90 days trading horizon American Electric is expected to generate 5.15 times less return on investment than Evolution Mining. But when comparing it to its historical volatility, American Electric Power is 2.12 times less risky than Evolution Mining. It trades about 0.1 of its potential returns per unit of risk. Evolution Mining Limited is currently generating about 0.24 of returns per unit of risk over similar time horizon. If you would invest 282.00 in Evolution Mining Limited on September 14, 2024 and sell it today you would earn a total of 35.00 from holding Evolution Mining Limited or generate 12.41% 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. Evolution Mining Limited
Performance |
| Timeline |
| American Electric Power |
| Evolution Mining |
American Electric and Evolution Mining Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Electric and Evolution Mining
The main advantage of trading using opposite American Electric and Evolution Mining positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Electric position performs unexpectedly, Evolution Mining 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 Evolution Mining will offset losses from the drop in Evolution Mining's long position.| American Electric vs. Evolution Mining Limited | American Electric vs. KENNAMETAL INC | American Electric vs. Taiwan Semiconductor Manufacturing | American Electric vs. American Public Education |
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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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.
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