Correlation Between 00108WAF7 and MUNRE

Can any of the company-specific risk be diversified away by investing in both 00108WAF7 and MUNRE 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 MUNRE 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 MUNRE 5875 23 MAY 42, you can compare the effects of market volatilities on 00108WAF7 and MUNRE 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 MUNRE. Check out your portfolio center. Please also check ongoing floating volatility patterns of 00108WAF7 and MUNRE.

Diversification Opportunities for 00108WAF7 and MUNRE

0.06

Correlation Coefficient

00108WAF7  MUNRE

Significant diversification

The 3 months correlation between 00108WAF7 and MUNRE is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding AEP TEX INC and MUNRE 5875 23 MAY 42 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MUNRE 5875 23 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 MUNRE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MUNRE 5875 23 has no effect on the direction of 00108WAF7 i.e., 00108WAF7 and MUNRE go up and down completely randomly.

Pair Corralation between 00108WAF7 and MUNRE

Assuming the 90 days trading horizon 00108WAF7 is expected to generate 1.31 times less return on investment than MUNRE. But when comparing it to its historical volatility, AEP TEX INC is 2.74 times less risky than MUNRE. It trades about 0.04 of its potential returns per unit of risk. MUNRE 5875 23 MAY 42 is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  10,323  in MUNRE 5875 23 MAY 42 on October 25, 2024 and sell it today you would lose (223.00) from holding MUNRE 5875 23 MAY 42 or give up 2.16% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	57.5%
Values	Daily Returns

AEP TEX INC  vs.  MUNRE 5875 23 MAY 42

AEP TEX INC

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in AEP TEX INC are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat fragile basic indicators, 00108WAF7 may actually be approaching a critical reversion point that can send shares even higher in February 2025.

MUNRE 5875 23

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in MUNRE 5875 23 MAY 42 are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain basic indicators, MUNRE may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with 00108WAF7 and MUNRE

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

The idea behind AEP TEX INC and MUNRE 5875 23 MAY 42 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.