Correlation Between 00108WAF7 and Tesla

Can any of the company-specific risk be diversified away by investing in both 00108WAF7 and Tesla 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 00108WAF7 and Tesla into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between AEP TEX INC and Tesla Inc, you can compare the effects of market volatilities on 00108WAF7 and Tesla 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 00108WAF7 with a short position of Tesla. Check out your portfolio center. Please also check ongoing floating volatility patterns of 00108WAF7 and Tesla.

Diversification Opportunities for 00108WAF7 and Tesla

0.04

Correlation Coefficient

00108WAF7  Tesla

Significant diversification

The 3 months correlation between 00108WAF7 and Tesla is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding AEP TEX INC and Tesla Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tesla Inc and 00108WAF7 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 AEP TEX INC are associated (or correlated) with Tesla. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tesla Inc has no effect on the direction of 00108WAF7 i.e., 00108WAF7 and Tesla go up and down completely randomly.

Pair Corralation between 00108WAF7 and Tesla

Assuming the 90 days trading horizon AEP TEX INC is expected to generate 37.31 times more return on investment than Tesla. However, 00108WAF7 is 37.31 times more volatile than Tesla Inc. It trades about 0.12 of its potential returns per unit of risk. Tesla Inc is currently generating about 0.08 per unit of risk. If you would invest  7,792  in AEP TEX INC on October 11, 2024 and sell it today you would lose (124.00) from holding AEP TEX INC or give up 1.59% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	64.04%
Values	Daily Returns

AEP TEX INC  vs.  Tesla Inc

AEP TEX INC

Risk-Adjusted Performance

12 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in AEP TEX INC are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, 00108WAF7 sustained solid returns over the last few months and may actually be approaching a breakup point.

Tesla Inc

Risk-Adjusted Performance

17 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Tesla Inc are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite somewhat abnormal essential indicators, Tesla sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with 00108WAF7 and Tesla

The main advantage of trading using opposite 00108WAF7 and Tesla positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if 00108WAF7 position performs unexpectedly, Tesla 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 Tesla will offset losses from the drop in Tesla's long position.

The idea behind AEP TEX INC and Tesla Inc 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.