Correlation Between EuroSite Power and American Electric
Can any of the company-specific risk be diversified away by investing in both EuroSite Power 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 EuroSite Power and American Electric into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between EuroSite Power and American Electric Power, you can compare the effects of market volatilities on EuroSite Power 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 EuroSite Power with a short position of American Electric. Check out your portfolio center. Please also check ongoing floating volatility patterns of EuroSite Power and American Electric.
Diversification Opportunities for EuroSite Power and American Electric
-0.13 | Correlation Coefficient |
Good diversification
The 3 months correlation between EuroSite and American is -0.13. Overlapping area represents the amount of risk that can be diversified away by holding EuroSite Power 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 EuroSite Power 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 EuroSite Power 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 EuroSite Power i.e., EuroSite Power and American Electric go up and down completely randomly.
Pair Corralation between EuroSite Power and American Electric
Given the investment horizon of 90 days EuroSite Power is expected to generate 1.16 times less return on investment than American Electric. In addition to that, EuroSite Power is 6.52 times more volatile than American Electric Power. It trades about 0.03 of its total potential returns per unit of risk. American Electric Power is currently generating about 0.25 per unit of volatility. If you would invest 9,907 in American Electric Power on November 29, 2024 and sell it today you would earn a total of 609.00 from holding American Electric Power or generate 6.15% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 95.45% |
| Values | Daily Returns |
EuroSite Power vs. American Electric Power
Performance |
| Timeline |
| EuroSite Power |
| American Electric Power |
EuroSite Power and American Electric Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with EuroSite Power and American Electric
The main advantage of trading using opposite EuroSite Power and American Electric positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if EuroSite Power 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.| EuroSite Power vs. American Electric Power | EuroSite Power vs. FirstEnergy | EuroSite Power vs. Entergy | EuroSite Power vs. Southern Company |
| American Electric vs. Southern Company | American Electric vs. Dominion Energy | American Electric vs. Nextera Energy | American Electric vs. Consolidated Edison |
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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.
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