Correlation Between American Electric and Engie Brasil
Can any of the company-specific risk be diversified away by investing in both American Electric and Engie Brasil 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 Engie Brasil 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 Engie Brasil Energia, you can compare the effects of market volatilities on American Electric and Engie Brasil 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 Engie Brasil. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Electric and Engie Brasil.
Diversification Opportunities for American Electric and Engie Brasil
0.66 | Correlation Coefficient |
Poor diversification
The 3 months correlation between American and Engie is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding American Electric Power and Engie Brasil Energia in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Engie Brasil Energia 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 Engie Brasil. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Engie Brasil Energia has no effect on the direction of American Electric i.e., American Electric and Engie Brasil go up and down completely randomly.
Pair Corralation between American Electric and Engie Brasil
Considering the 90-day investment horizon American Electric Power is expected to generate 0.48 times more return on investment than Engie Brasil. However, American Electric Power is 2.07 times less risky than Engie Brasil. It trades about 0.02 of its potential returns per unit of risk. Engie Brasil Energia is currently generating about 0.01 per unit of risk. If you would invest 8,727 in American Electric Power on August 24, 2024 and sell it today you would earn a total of 1,032 from holding American Electric Power or generate 11.83% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
American Electric Power vs. Engie Brasil Energia
Performance |
| Timeline |
| American Electric Power |
| Engie Brasil Energia |
American Electric and Engie Brasil Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Electric and Engie Brasil
The main advantage of trading using opposite American Electric and Engie Brasil positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Electric position performs unexpectedly, Engie Brasil 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 Engie Brasil will offset losses from the drop in Engie Brasil's long position.| American Electric vs. Southern Company | American Electric vs. Dominion Energy | American Electric vs. Nextera Energy | American Electric vs. Consolidated Edison |
| Engie Brasil vs. Red Electrica Corporacion | Engie Brasil vs. Centrais Eltricas Brasileiras | Engie Brasil vs. Centrais Electricas Brasileiras | Engie Brasil vs. Enel Chile SA |
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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.
Other Complementary Tools
| Pair Correlation Compare performance and examine fundamental relationship between any two equity instruments | |
| Options Analysis Analyze and evaluate options and option chains as a potential hedge for your portfolios | |
| Instant Ratings Determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance | |
| Competition Analyzer Analyze and compare many basic indicators for a group of related or unrelated entities | |
| Positions Ratings Determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance |