Correlation Between American Electric and Becton Dickinson
Can any of the company-specific risk be diversified away by investing in both American Electric and Becton Dickinson 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 Becton Dickinson 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 Becton Dickinson And, you can compare the effects of market volatilities on American Electric and Becton Dickinson 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 Becton Dickinson. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Electric and Becton Dickinson.
Diversification Opportunities for American Electric and Becton Dickinson
-0.68 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between American and Becton is -0.68. Overlapping area represents the amount of risk that can be diversified away by holding American Electric Power and Becton Dickinson And in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Becton Dickinson And 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 Becton Dickinson. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Becton Dickinson And has no effect on the direction of American Electric i.e., American Electric and Becton Dickinson go up and down completely randomly.
Pair Corralation between American Electric and Becton Dickinson
If you would invest 4,954 in American Electric Power on August 31, 2024 and sell it today you would earn a total of 74.00 from holding American Electric Power or generate 1.49% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 3.13% |
| Values | Daily Returns |
American Electric Power vs. Becton Dickinson And
Performance |
| Timeline |
| American Electric Power |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
| Becton Dickinson And |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
American Electric and Becton Dickinson Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Electric and Becton Dickinson
The main advantage of trading using opposite American Electric and Becton Dickinson positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Electric position performs unexpectedly, Becton Dickinson 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 Becton Dickinson will offset losses from the drop in Becton Dickinson's long position.The idea behind American Electric Power and Becton Dickinson And 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.| Becton Dickinson vs. Brighthouse Financial | Becton Dickinson vs. Brighthouse Financial | Becton Dickinson vs. Brighthouse Financial |
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 Transaction History module to view history of all your transactions and understand their impact on performance.
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