Correlation Between LEVEL and 00108WAF7

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

By analyzing existing cross correlation between LEVEL 3 FING and AEP TEX INC, you can compare the effects of market volatilities on LEVEL and 00108WAF7 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 LEVEL with a short position of 00108WAF7. Check out your portfolio center. Please also check ongoing floating volatility patterns of LEVEL and 00108WAF7.

Diversification Opportunities for LEVEL and 00108WAF7

-0.17

Correlation Coefficient

LEVEL  00108WAF7

Good diversification

The 3 months correlation between LEVEL and 00108WAF7 is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding LEVEL 3 FING and AEP TEX INC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AEP TEX INC and LEVEL 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 LEVEL 3 FING are associated (or correlated) with 00108WAF7. 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 INC has no effect on the direction of LEVEL i.e., LEVEL and 00108WAF7 go up and down completely randomly.

Pair Corralation between LEVEL and 00108WAF7

Assuming the 90 days trading horizon LEVEL 3 FING is expected to under-perform the 00108WAF7. In addition to that, LEVEL is 7.39 times more volatile than AEP TEX INC. It trades about -0.18 of its total potential returns per unit of risk. AEP TEX INC is currently generating about -0.01 per unit of volatility. If you would invest  7,599  in AEP TEX INC on December 5, 2024 and sell it today you would lose (60.00) from holding AEP TEX INC or give up 0.79% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	92.86%
Values	Daily Returns

LEVEL 3 FING  vs.  AEP TEX INC

LEVEL 3 FING

Risk-Adjusted Performance

Very Weak

Over the last 90 days LEVEL 3 FING has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Bond's basic indicators remain somewhat strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for LEVEL 3 FING investors.

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 somewhat strong basic indicators, 00108WAF7 is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with LEVEL and 00108WAF7

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

The idea behind LEVEL 3 FING and AEP TEX 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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.