Correlation Between Bio-Techne Corp and American Electric

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

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

Diversification Opportunities for Bio-Techne Corp and American Electric

0.11

Correlation Coefficient

Bio-Techne Corp  American Electric

Average diversification

The 3 months correlation between Bio-Techne and American is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding Bio Techne Corp 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 Bio-Techne Corp 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 Bio Techne Corp 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 Bio-Techne Corp i.e., Bio-Techne Corp and American Electric go up and down completely randomly.

Pair Corralation between Bio-Techne Corp and American Electric

Assuming the 90 days trading horizon Bio-Techne Corp is expected to generate 1.68 times less return on investment than American Electric. In addition to that, Bio-Techne Corp is 2.13 times more volatile than American Electric Power. It trades about 0.03 of its total potential returns per unit of risk. American Electric Power is currently generating about 0.12 per unit of volatility. If you would invest  6,910  in American Electric Power on October 24, 2024 and sell it today you would earn a total of  2,490  from holding American Electric Power or generate 36.03% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	99.6%
Values	Daily Returns

Bio Techne Corp  vs.  American Electric Power

Bio Techne Corp

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Bio Techne Corp are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Bio-Techne Corp unveiled solid returns over the last few months and may actually be approaching a breakup point.

American Electric Power

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in American Electric Power are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. 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.

Pair Trading with Bio-Techne Corp and American Electric

The main advantage of trading using opposite Bio-Techne Corp and American Electric positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bio-Techne Corp 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 Bio Techne Corp 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.