Correlation Between 00108WAF7 and 02005NBQ2

Can any of the company-specific risk be diversified away by investing in both 00108WAF7 and 02005NBQ2 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 02005NBQ2 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 ALLY 475 09 JUN 27, you can compare the effects of market volatilities on 00108WAF7 and 02005NBQ2 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 02005NBQ2. Check out your portfolio center. Please also check ongoing floating volatility patterns of 00108WAF7 and 02005NBQ2.

Diversification Opportunities for 00108WAF7 and 02005NBQ2

-0.22

Correlation Coefficient

00108WAF7  02005NBQ2

Very good diversification

The 3 months correlation between 00108WAF7 and 02005NBQ2 is -0.22. Overlapping area represents the amount of risk that can be diversified away by holding AEP TEX INC and ALLY 475 09 JUN 27 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ALLY 475 09 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 02005NBQ2. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ALLY 475 09 has no effect on the direction of 00108WAF7 i.e., 00108WAF7 and 02005NBQ2 go up and down completely randomly.

Pair Corralation between 00108WAF7 and 02005NBQ2

Assuming the 90 days trading horizon AEP TEX INC is expected to under-perform the 02005NBQ2. In addition to that, 00108WAF7 is 2.13 times more volatile than ALLY 475 09 JUN 27. It trades about -0.17 of its total potential returns per unit of risk. ALLY 475 09 JUN 27 is currently generating about -0.19 per unit of volatility. If you would invest  9,938  in ALLY 475 09 JUN 27 on December 11, 2024 and sell it today you would lose (403.00) from holding ALLY 475 09 JUN 27 or give up 4.06% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	71.43%
Values	Daily Returns

AEP TEX INC  vs.  ALLY 475 09 JUN 27

AEP TEX INC

Risk-Adjusted Performance

Very Weak

Over the last 90 days AEP TEX INC has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unsteady performance, the Bond's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for AEP TEX INC investors.

ALLY 475 09

Risk-Adjusted Performance

Very Weak

Over the last 90 days ALLY 475 09 JUN 27 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, 02005NBQ2 is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with 00108WAF7 and 02005NBQ2

The main advantage of trading using opposite 00108WAF7 and 02005NBQ2 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if 00108WAF7 position performs unexpectedly, 02005NBQ2 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 02005NBQ2 will offset losses from the drop in 02005NBQ2's long position.

The idea behind AEP TEX INC and ALLY 475 09 JUN 27 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.