Correlation Between Balfour Beatty and American Electric
Can any of the company-specific risk be diversified away by investing in both Balfour Beatty and American Electric 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 Balfour Beatty and American Electric into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Balfour Beatty plc and American Electric Power, you can compare the effects of market volatilities on Balfour Beatty and American Electric 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 Balfour Beatty with a short position of American Electric. Check out your portfolio center. Please also check ongoing floating volatility patterns of Balfour Beatty and American Electric.
Diversification Opportunities for Balfour Beatty and American Electric
-0.45 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Balfour and American is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding Balfour Beatty plc and American Electric Power in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Electric Power and Balfour Beatty 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 Balfour Beatty plc are associated (or correlated) with American Electric. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Electric Power has no effect on the direction of Balfour Beatty i.e., Balfour Beatty and American Electric go up and down completely randomly.
Pair Corralation between Balfour Beatty and American Electric
Assuming the 90 days trading horizon Balfour Beatty plc is expected to generate 1.37 times more return on investment than American Electric. However, Balfour Beatty is 1.37 times more volatile than American Electric Power. It trades about 0.12 of its potential returns per unit of risk. American Electric Power is currently generating about 0.1 per unit of risk. If you would invest 33,357 in Balfour Beatty plc on September 1, 2024 and sell it today you would earn a total of 11,683 from holding Balfour Beatty plc or generate 35.02% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 99.47% |
| Values | Daily Returns |
Balfour Beatty plc vs. American Electric Power
Performance |
| Timeline |
| Balfour Beatty plc |
| American Electric Power |
Balfour Beatty and American Electric Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Balfour Beatty and American Electric
The main advantage of trading using opposite Balfour Beatty and American Electric positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Balfour Beatty position performs unexpectedly, American Electric 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 American Electric will offset losses from the drop in American Electric's long position.| Balfour Beatty vs. Lords Grp Trading | Balfour Beatty vs. Taylor Maritime Investments | Balfour Beatty vs. TR Property Investment | Balfour Beatty vs. Tatton Asset Management |
| American Electric vs. Team Internet Group | American Electric vs. Gamma Communications PLC | American Electric vs. Southern Copper Corp | American Electric vs. McEwen Mining |
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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.
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