Correlation Between BioNTech and American Electric

Can any of the company-specific risk be diversified away by investing in both BioNTech 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 BioNTech and American Electric into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between BioNTech SE and American Electric Power, you can compare the effects of market volatilities on BioNTech 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 BioNTech with a short position of American Electric. Check out your portfolio center. Please also check ongoing floating volatility patterns of BioNTech and American Electric.

Diversification Opportunities for BioNTech and American Electric

0.12

Correlation Coefficient

BioNTech  American Electric

Average diversification

The 3 months correlation between BioNTech and American is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding BioNTech SE 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 BioNTech 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 BioNTech SE 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 BioNTech i.e., BioNTech and American Electric go up and down completely randomly.

Pair Corralation between BioNTech and American Electric

Assuming the 90 days trading horizon BioNTech SE is expected to generate 2.46 times more return on investment than American Electric. However, BioNTech is 2.46 times more volatile than American Electric Power. It trades about 0.05 of its potential returns per unit of risk. American Electric Power is currently generating about 0.09 per unit of risk. If you would invest  9,376  in BioNTech SE on October 9, 2024 and sell it today you would earn a total of  2,914  from holding BioNTech SE or generate 31.08% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	99.6%
Values	Daily Returns

BioNTech SE  vs.  American Electric Power

BioNTech SE

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in BioNTech SE are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain basic indicators, BioNTech may actually be approaching a critical reversion point that can send shares even higher in February 2025.

American Electric Power

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in American Electric Power are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, American Electric is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with BioNTech and American Electric

The main advantage of trading using opposite BioNTech and American Electric positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BioNTech 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.

The idea behind BioNTech SE and American Electric Power pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.