Correlation Between 00108WAF7 and 832696AV0

Can any of the company-specific risk be diversified away by investing in both 00108WAF7 and 832696AV0 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 832696AV0 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 SJM 275 15 SEP 41, you can compare the effects of market volatilities on 00108WAF7 and 832696AV0 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 832696AV0. Check out your portfolio center. Please also check ongoing floating volatility patterns of 00108WAF7 and 832696AV0.

Diversification Opportunities for 00108WAF7 and 832696AV0

-0.01

Correlation Coefficient

00108WAF7  832696AV0

Good diversification

The 3 months correlation between 00108WAF7 and 832696AV0 is -0.01. Overlapping area represents the amount of risk that can be diversified away by holding AEP TEX INC and SJM 275 15 SEP 41 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SJM 275 15 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 832696AV0. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SJM 275 15 has no effect on the direction of 00108WAF7 i.e., 00108WAF7 and 832696AV0 go up and down completely randomly.

Pair Corralation between 00108WAF7 and 832696AV0

Assuming the 90 days trading horizon 00108WAF7 is expected to generate 1.98 times less return on investment than 832696AV0. But when comparing it to its historical volatility, AEP TEX INC is 1.69 times less risky than 832696AV0. It trades about 0.1 of its potential returns per unit of risk. SJM 275 15 SEP 41 is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  6,803  in SJM 275 15 SEP 41 on September 17, 2024 and sell it today you would earn a total of  245.00  from holding SJM 275 15 SEP 41 or generate 3.6% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	46.15%
Values	Daily Returns

AEP TEX INC  vs.  SJM 275 15 SEP 41

AEP TEX INC

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in AEP TEX INC are ranked lower than 10 (%) 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.

SJM 275 15

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SJM 275 15 SEP 41 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, 832696AV0 is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with 00108WAF7 and 832696AV0

The main advantage of trading using opposite 00108WAF7 and 832696AV0 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if 00108WAF7 position performs unexpectedly, 832696AV0 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 832696AV0 will offset losses from the drop in 832696AV0's long position.

The idea behind AEP TEX INC and SJM 275 15 SEP 41 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.