Correlation Between IShares Core and 0010EPAF5

Can any of the company-specific risk be diversified away by investing in both IShares Core and 0010EPAF5 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 IShares Core and 0010EPAF5 into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between iShares Core SP and AEP TEX CENT, you can compare the effects of market volatilities on IShares Core and 0010EPAF5 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 IShares Core with a short position of 0010EPAF5. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Core and 0010EPAF5.

Diversification Opportunities for IShares Core and 0010EPAF5

-0.15

Correlation Coefficient

IShares Core  0010EPAF5

Good diversification

The 3 months correlation between IShares and 0010EPAF5 is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding iShares Core SP and AEP TEX CENT in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AEP TEX CENT and IShares Core 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 iShares Core SP are associated (or correlated) with 0010EPAF5. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AEP TEX CENT has no effect on the direction of IShares Core i.e., IShares Core and 0010EPAF5 go up and down completely randomly.

Pair Corralation between IShares Core and 0010EPAF5

Considering the 90-day investment horizon iShares Core SP is expected to under-perform the 0010EPAF5. But the etf apears to be less risky and, when comparing its historical volatility, iShares Core SP is 1.07 times less risky than 0010EPAF5. The etf trades about -0.1 of its potential returns per unit of risk. The AEP TEX CENT is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  10,624  in AEP TEX CENT on December 24, 2024 and sell it today you would earn a total of  299.00  from holding AEP TEX CENT or generate 2.81% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	73.77%
Values	Daily Returns

iShares Core SP  vs.  AEP TEX CENT

iShares Core SP

Risk-Adjusted Performance

Very Weak

Over the last 90 days iShares Core SP has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, IShares Core is not utilizing all of its potentials. The recent stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

AEP TEX CENT

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in AEP TEX CENT are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, 0010EPAF5 is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with IShares Core and 0010EPAF5

The main advantage of trading using opposite IShares Core and 0010EPAF5 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares Core position performs unexpectedly, 0010EPAF5 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 0010EPAF5 will offset losses from the drop in 0010EPAF5's long position.

The idea behind iShares Core SP and AEP TEX CENT 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.