Correlation Between American Electric and Fidelity Advisor

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Can any of the company-specific risk be diversified away by investing in both American Electric and Fidelity Advisor 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 Fidelity Advisor 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 Fidelity Advisor Utilities, you can compare the effects of market volatilities on American Electric and Fidelity Advisor 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 Fidelity Advisor. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Electric and Fidelity Advisor.

Diversification Opportunities for American Electric and Fidelity Advisor

-0.31
  Correlation Coefficient

Very good diversification

The 3 months correlation between American and Fidelity is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding American Electric Power and Fidelity Advisor Utilities in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fidelity Advisor Uti 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 Fidelity Advisor. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fidelity Advisor Uti has no effect on the direction of American Electric i.e., American Electric and Fidelity Advisor go up and down completely randomly.

Pair Corralation between American Electric and Fidelity Advisor

Considering the 90-day investment horizon American Electric Power is expected to generate 1.14 times more return on investment than Fidelity Advisor. However, American Electric is 1.14 times more volatile than Fidelity Advisor Utilities. It trades about -0.03 of its potential returns per unit of risk. Fidelity Advisor Utilities is currently generating about -0.07 per unit of risk. If you would invest  9,451  in American Electric Power on September 12, 2024 and sell it today you would lose (88.10) from holding American Electric Power or give up 0.93% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

American Electric Power  vs.  Fidelity Advisor Utilities

 Performance 
       Timeline  
American Electric Power 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days American Electric Power has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest unfluctuating performance, the Stock's technical and fundamental indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.
Fidelity Advisor Uti 

Risk-Adjusted Performance

6 of 100

 
Weak
 
Strong
Modest
Compared to the overall equity markets, risk-adjusted returns on investments in Fidelity Advisor Utilities are ranked lower than 6 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong technical and fundamental indicators, Fidelity Advisor is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

American Electric and Fidelity Advisor Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with American Electric and Fidelity Advisor

The main advantage of trading using opposite American Electric and Fidelity Advisor positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Electric position performs unexpectedly, Fidelity Advisor 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 Fidelity Advisor will offset losses from the drop in Fidelity Advisor's long position.
The idea behind American Electric Power and Fidelity Advisor Utilities pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
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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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.

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