Correlation Between American Electric and Ellomay Capital

Can any of the company-specific risk be diversified away by investing in both American Electric and Ellomay Capital 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 Ellomay Capital 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 Ellomay Capital, you can compare the effects of market volatilities on American Electric and Ellomay Capital 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 Ellomay Capital. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Electric and Ellomay Capital.

Diversification Opportunities for American Electric and Ellomay Capital

-0.14

Correlation Coefficient

American Electric  Ellomay Capital

Good diversification

The 3 months correlation between American and Ellomay is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding American Electric Power and Ellomay Capital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ellomay Capital 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 Ellomay Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ellomay Capital has no effect on the direction of American Electric i.e., American Electric and Ellomay Capital go up and down completely randomly.

Pair Corralation between American Electric and Ellomay Capital

Considering the 90-day investment horizon American Electric Power is expected to under-perform the Ellomay Capital. But the stock apears to be less risky and, when comparing its historical volatility, American Electric Power is 2.76 times less risky than Ellomay Capital. The stock trades about 0.0 of its potential returns per unit of risk. The Ellomay Capital is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  1,260  in Ellomay Capital on September 1, 2024 and sell it today you would earn a total of  356.00  from holding Ellomay Capital or generate 28.25% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	92.06%
Values	Daily Returns

American Electric Power  vs.  Ellomay Capital

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. Even with relatively invariable technical and fundamental indicators, American Electric is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Ellomay Capital

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Ellomay Capital are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of very weak essential indicators, Ellomay Capital displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with American Electric and Ellomay Capital

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

The idea behind American Electric Power and Ellomay Capital 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.