Correlation Between American Electric and Fidelity Advisor
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 Period | 3 Months [change] |
Direction | Moves Against |
Strength | Insignificant |
Accuracy | 100.0% |
Values | Daily Returns |
American Electric Power vs. Fidelity Advisor Utilities
Performance |
Timeline |
American Electric Power |
Fidelity Advisor Uti |
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.American Electric vs. Southern Company | American Electric vs. Dominion Energy | American Electric vs. Nextera Energy | American Electric vs. Consolidated Edison |
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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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.
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