Correlation Between Dupont De and American Electric
Can any of the company-specific risk be diversified away by investing in both Dupont De 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 Dupont De and American Electric into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Dupont De Nemours and American Electric Power, you can compare the effects of market volatilities on Dupont De 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 Dupont De with a short position of American Electric. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dupont De and American Electric.
Diversification Opportunities for Dupont De and American Electric
-0.19 | Correlation Coefficient |
Good diversification
The 3 months correlation between Dupont and American is -0.19. Overlapping area represents the amount of risk that can be diversified away by holding Dupont De Nemours 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 Dupont De 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 Dupont De Nemours 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 Dupont De i.e., Dupont De and American Electric go up and down completely randomly.
Pair Corralation between Dupont De and American Electric
Allowing for the 90-day total investment horizon Dupont De is expected to generate 3.65 times less return on investment than American Electric. But when comparing it to its historical volatility, Dupont De Nemours is 1.51 times less risky than American Electric. It trades about 0.05 of its potential returns per unit of risk. American Electric Power is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest 9,005 in American Electric Power on September 2, 2024 and sell it today you would earn a total of 495.00 from holding American Electric Power or generate 5.5% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 95.45% |
| Values | Daily Returns |
Dupont De Nemours vs. American Electric Power
Performance |
| Timeline |
| Dupont De Nemours |
| American Electric Power |
Dupont De and American Electric Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Dupont De and American Electric
The main advantage of trading using opposite Dupont De and American Electric positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dupont De 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.| Dupont De vs. Eastman Chemical | Dupont De vs. Olin Corporation | Dupont De vs. Cabot | Dupont De vs. Kronos Worldwide |
| American Electric vs. WILLIS LEASE FIN | American Electric vs. Air Lease | American Electric vs. China Communications Services | American Electric vs. Singapore Telecommunications Limited |
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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.
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