Correlation Between Evergy, and American Electric

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

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

Diversification Opportunities for Evergy, and American Electric

0.2

Correlation Coefficient

Evergy,  American Electric

Modest diversification

The 3 months correlation between Evergy, and American is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Evergy, 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 Evergy, 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 Evergy, 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 Evergy, i.e., Evergy, and American Electric go up and down completely randomly.

Pair Corralation between Evergy, and American Electric

Given the investment horizon of 90 days Evergy, is expected to generate 0.77 times more return on investment than American Electric. However, Evergy, is 1.3 times less risky than American Electric. It trades about 0.09 of its potential returns per unit of risk. American Electric Power is currently generating about 0.0 per unit of risk. If you would invest  6,034  in Evergy, on October 26, 2024 and sell it today you would earn a total of  272.00  from holding Evergy, or generate 4.51% return on investment over 90 days.

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

Evergy,  vs.  American Electric Power

Evergy,

Risk-Adjusted Performance

6 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Evergy, are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Evergy, is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

American Electric Power

Risk-Adjusted Performance

0 of 100

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 recent stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Evergy, and American Electric

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

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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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.