Correlation Between VERBUND AG and American Electric
Can any of the company-specific risk be diversified away by investing in both VERBUND AG 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 VERBUND AG and American Electric into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between VERBUND AG and American Electric Power, you can compare the effects of market volatilities on VERBUND AG 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 VERBUND AG with a short position of American Electric. Check out your portfolio center. Please also check ongoing floating volatility patterns of VERBUND AG and American Electric.
Diversification Opportunities for VERBUND AG and American Electric
-0.05 | Correlation Coefficient |
Good diversification
The 3 months correlation between VERBUND and American is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding VERBUND AG 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 VERBUND AG 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 VERBUND AG 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 VERBUND AG i.e., VERBUND AG and American Electric go up and down completely randomly.
Pair Corralation between VERBUND AG and American Electric
Assuming the 90 days trading horizon VERBUND AG is expected to under-perform the American Electric. In addition to that, VERBUND AG is 1.25 times more volatile than American Electric Power. It trades about 0.0 of its total potential returns per unit of risk. American Electric Power is currently generating about 0.03 per unit of volatility. If you would invest 8,256 in American Electric Power on August 27, 2024 and sell it today you would earn a total of 1,194 from holding American Electric Power or generate 14.46% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
VERBUND AG vs. American Electric Power
Performance |
| Timeline |
| VERBUND AG |
| American Electric Power |
VERBUND AG and American Electric Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with VERBUND AG and American Electric
The main advantage of trading using opposite VERBUND AG and American Electric positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if VERBUND AG 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.| VERBUND AG vs. NextEra Energy | VERBUND AG vs. The Southern | VERBUND AG vs. American Electric Power | VERBUND AG vs. Eversource Energy |
| American Electric vs. NextEra Energy | American Electric vs. The Southern | American Electric vs. VERBUND AG | American Electric vs. Eversource Energy |
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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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