Correlation Between TRUIST and 00108WAF7

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

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

Diversification Opportunities for TRUIST and 00108WAF7

0.11

Correlation Coefficient

TRUIST  00108WAF7

Average diversification

The 3 months correlation between TRUIST and 00108WAF7 is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding TRUIST FINANCIAL P 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 TRUIST 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 TRUIST FINANCIAL P 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 TRUIST i.e., TRUIST and 00108WAF7 go up and down completely randomly.

Pair Corralation between TRUIST and 00108WAF7

Assuming the 90 days trading horizon TRUIST is expected to generate 60.23 times less return on investment than 00108WAF7. But when comparing it to its historical volatility, TRUIST FINANCIAL P is 50.59 times less risky than 00108WAF7. It trades about 0.22 of its potential returns per unit of risk. AEP TEX INC is currently generating about 0.26 of returns per unit of risk over similar time horizon. If you would invest  7,219  in AEP TEX INC on October 20, 2024 and sell it today you would earn a total of  1,002  from holding AEP TEX INC or generate 13.88% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	57.14%
Values	Daily Returns

TRUIST FINANCIAL P  vs.  AEP TEX INC

TRUIST FINANCIAL P

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in TRUIST FINANCIAL P are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, TRUIST is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

AEP TEX INC

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in AEP TEX INC are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. 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 TRUIST and 00108WAF7

The main advantage of trading using opposite TRUIST and 00108WAF7 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if TRUIST 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 TRUIST FINANCIAL P 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.