Correlation Between APPLIED MATERIALS and American Electric
Can any of the company-specific risk be diversified away by investing in both APPLIED MATERIALS 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 APPLIED MATERIALS and American Electric into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between APPLIED MATERIALS and American Electric Power, you can compare the effects of market volatilities on APPLIED MATERIALS 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 APPLIED MATERIALS with a short position of American Electric. Check out your portfolio center. Please also check ongoing floating volatility patterns of APPLIED MATERIALS and American Electric.
Diversification Opportunities for APPLIED MATERIALS and American Electric
-0.25 | Correlation Coefficient |
Very good diversification
The 3 months correlation between APPLIED and American is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding APPLIED MATERIALS 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 APPLIED MATERIALS 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 APPLIED MATERIALS 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 APPLIED MATERIALS i.e., APPLIED MATERIALS and American Electric go up and down completely randomly.
Pair Corralation between APPLIED MATERIALS and American Electric
Assuming the 90 days trading horizon APPLIED MATERIALS is expected to under-perform the American Electric. In addition to that, APPLIED MATERIALS is 1.73 times more volatile than American Electric Power. It trades about -0.07 of its total potential returns per unit of risk. American Electric Power is currently generating about 0.11 per unit of volatility. If you would invest 8,769 in American Electric Power on December 23, 2024 and sell it today you would earn a total of 881.00 from holding American Electric Power or generate 10.05% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Insignificant |
Accuracy | 100.0% |
Values | Daily Returns |
APPLIED MATERIALS vs. American Electric Power
Performance |
Timeline |
APPLIED MATERIALS |
American Electric Power |
APPLIED MATERIALS and American Electric Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with APPLIED MATERIALS and American Electric
The main advantage of trading using opposite APPLIED MATERIALS and American Electric positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if APPLIED MATERIALS 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.APPLIED MATERIALS vs. TRADEGATE | APPLIED MATERIALS vs. Computer And Technologies | APPLIED MATERIALS vs. CANON MARKETING JP | APPLIED MATERIALS vs. United Internet AG |
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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 Bonds Directory module to find actively traded corporate debentures issued by US companies.
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