Correlation Between Gear4music Plc and American Electric
Can any of the company-specific risk be diversified away by investing in both Gear4music Plc 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 Gear4music Plc and American Electric into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Gear4music Plc and American Electric Power, you can compare the effects of market volatilities on Gear4music Plc 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 Gear4music Plc with a short position of American Electric. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gear4music Plc and American Electric.
Diversification Opportunities for Gear4music Plc and American Electric
0.74 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Gear4music and American is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Gear4music 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 Gear4music Plc 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 Gear4music 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 Gear4music Plc i.e., Gear4music Plc and American Electric go up and down completely randomly.
Pair Corralation between Gear4music Plc and American Electric
Assuming the 90 days trading horizon Gear4music Plc is expected to generate 1.86 times more return on investment than American Electric. However, Gear4music Plc is 1.86 times more volatile than American Electric Power. It trades about 0.14 of its potential returns per unit of risk. American Electric Power is currently generating about 0.04 per unit of risk. If you would invest 15,750 in Gear4music Plc on September 13, 2024 and sell it today you would earn a total of 1,000.00 from holding Gear4music Plc or generate 6.35% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.65% |
| Values | Daily Returns |
Gear4music Plc vs. American Electric Power
Performance |
| Timeline |
| Gear4music Plc |
| American Electric Power |
Gear4music Plc and American Electric Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Gear4music Plc and American Electric
The main advantage of trading using opposite Gear4music Plc and American Electric positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Gear4music Plc 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.| Gear4music Plc vs. Summit Materials Cl | Gear4music Plc vs. Associated British Foods | Gear4music Plc vs. The Mercantile Investment | Gear4music Plc vs. Martin Marietta Materials |
| American Electric vs. Samsung Electronics Co | American Electric vs. Samsung Electronics Co | American Electric vs. Hyundai Motor | American Electric vs. Reliance Industries Ltd |
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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.
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