Correlation Between American Electric and Companhia Paranaense
Can any of the company-specific risk be diversified away by investing in both American Electric and Companhia Paranaense 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 Companhia Paranaense 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 Companhia Paranaense de, you can compare the effects of market volatilities on American Electric and Companhia Paranaense 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 Companhia Paranaense. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Electric and Companhia Paranaense.
Diversification Opportunities for American Electric and Companhia Paranaense
0.74 | Correlation Coefficient |
Poor diversification
The 3 months correlation between American and Companhia is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding American Electric Power and Companhia Paranaense de in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Companhia Paranaense 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 Companhia Paranaense. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Companhia Paranaense has no effect on the direction of American Electric i.e., American Electric and Companhia Paranaense go up and down completely randomly.
Pair Corralation between American Electric and Companhia Paranaense
Considering the 90-day investment horizon American Electric Power is expected to generate 0.56 times more return on investment than Companhia Paranaense. However, American Electric Power is 1.78 times less risky than Companhia Paranaense. It trades about 0.11 of its potential returns per unit of risk. Companhia Paranaense de is currently generating about -0.04 per unit of risk. If you would invest 9,645 in American Electric Power on August 30, 2024 and sell it today you would earn a total of 344.00 from holding American Electric Power or generate 3.57% 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. Companhia Paranaense de
Performance |
| Timeline |
| American Electric Power |
| Companhia Paranaense |
American Electric and Companhia Paranaense Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Electric and Companhia Paranaense
The main advantage of trading using opposite American Electric and Companhia Paranaense positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Electric position performs unexpectedly, Companhia Paranaense 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 Companhia Paranaense will offset losses from the drop in Companhia Paranaense's long position.| American Electric vs. Southern Company | American Electric vs. Dominion Energy | American Electric vs. Nextera Energy | American Electric vs. Consolidated Edison |
| Companhia Paranaense vs. Encore Capital Group | Companhia Paranaense vs. Chemours Co | Companhia Paranaense vs. Siriuspoint | Companhia Paranaense vs. Freedom Bank of |
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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
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