Correlation Between Adtalem Global and American Electric

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

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

Diversification Opportunities for Adtalem Global and American Electric

0.28

Correlation Coefficient

Adtalem Global  American Electric

Modest diversification

The 3 months correlation between Adtalem and American is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Adtalem Global Education 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 Adtalem Global 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 Adtalem Global Education 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 Adtalem Global i.e., Adtalem Global and American Electric go up and down completely randomly.

Pair Corralation between Adtalem Global and American Electric

Assuming the 90 days trading horizon Adtalem Global is expected to generate 1.96 times less return on investment than American Electric. In addition to that, Adtalem Global is 1.6 times more volatile than American Electric Power. It trades about 0.04 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 22, 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 Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Adtalem Global Education  vs.  American Electric Power

Adtalem Global Education

Risk-Adjusted Performance

Weak

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

American Electric Power

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in American Electric Power are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, American Electric may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Adtalem Global and American Electric

The main advantage of trading using opposite Adtalem Global and American Electric positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Adtalem Global 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 Adtalem Global Education 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.