Correlation Between American Electric and United States
Can any of the company-specific risk be diversified away by investing in both American Electric and United States 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 United States 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 United States Cellular, you can compare the effects of market volatilities on American Electric and United States 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 United States. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Electric and United States.
Diversification Opportunities for American Electric and United States
-0.48 | Correlation Coefficient |
Very good diversification
The 3 months correlation between American and United is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding American Electric Power and United States Cellular in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on United States Cellular 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 United States. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of United States Cellular has no effect on the direction of American Electric i.e., American Electric and United States go up and down completely randomly.
Pair Corralation between American Electric and United States
Considering the 90-day investment horizon American Electric Power is expected to under-perform the United States. In addition to that, American Electric is 2.52 times more volatile than United States Cellular. It trades about -0.06 of its total potential returns per unit of risk. United States Cellular is currently generating about 0.1 per unit of volatility. If you would invest 2,241 in United States Cellular on August 24, 2024 and sell it today you would earn a total of 29.00 from holding United States Cellular or generate 1.29% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 95.65% |
| Values | Daily Returns |
American Electric Power vs. United States Cellular
Performance |
| Timeline |
| American Electric Power |
| United States Cellular |
American Electric and United States Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Electric and United States
The main advantage of trading using opposite American Electric and United States positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Electric position performs unexpectedly, United States 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 United States will offset losses from the drop in United States' long position.| American Electric vs. Southern Company | American Electric vs. Dominion Energy | American Electric vs. Nextera Energy | American Electric vs. Consolidated Edison |
| United States vs. United States Cellular | United States vs. United States Cellular | United States vs. Office Properties Income | United States vs. Southern Company Series |
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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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