Correlation Between American Electric and 24SEVENOFFICE GROUP

Can any of the company-specific risk be diversified away by investing in both American Electric and 24SEVENOFFICE GROUP 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 American Electric and 24SEVENOFFICE GROUP into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between American Electric Power and 24SEVENOFFICE GROUP AB, you can compare the effects of market volatilities on American Electric and 24SEVENOFFICE GROUP 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 American Electric with a short position of 24SEVENOFFICE GROUP. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Electric and 24SEVENOFFICE GROUP.

Diversification Opportunities for American Electric and 24SEVENOFFICE GROUP

0.2

Correlation Coefficient

American Electric  24SEVENOFFICE GROUP

Modest diversification

The 3 months correlation between American and 24SEVENOFFICE is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding American Electric Power and 24SEVENOFFICE GROUP AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on 24SEVENOFFICE GROUP and American Electric 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 American Electric Power are associated (or correlated) with 24SEVENOFFICE GROUP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of 24SEVENOFFICE GROUP has no effect on the direction of American Electric i.e., American Electric and 24SEVENOFFICE GROUP go up and down completely randomly.

Pair Corralation between American Electric and 24SEVENOFFICE GROUP

Assuming the 90 days trading horizon American Electric is expected to generate 62.25 times less return on investment than 24SEVENOFFICE GROUP. But when comparing it to its historical volatility, American Electric Power is 1.07 times less risky than 24SEVENOFFICE GROUP. It trades about 0.01 of its potential returns per unit of risk. 24SEVENOFFICE GROUP AB is currently generating about 0.3 of returns per unit of risk over similar time horizon. If you would invest  197.00  in 24SEVENOFFICE GROUP AB on October 12, 2024 and sell it today you would earn a total of  12.00  from holding 24SEVENOFFICE GROUP AB or generate 6.09% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

American Electric Power  vs.  24SEVENOFFICE GROUP AB

American Electric Power

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days American Electric Power has generated negative risk-adjusted returns adding no value to investors with long positions. 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.

24SEVENOFFICE GROUP

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days 24SEVENOFFICE GROUP AB has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, 24SEVENOFFICE GROUP is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with American Electric and 24SEVENOFFICE GROUP

The main advantage of trading using opposite American Electric and 24SEVENOFFICE GROUP positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Electric position performs unexpectedly, 24SEVENOFFICE GROUP 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 24SEVENOFFICE GROUP will offset losses from the drop in 24SEVENOFFICE GROUP's long position.

The idea behind American Electric Power and 24SEVENOFFICE GROUP AB 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.

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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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.