Correlation Between Vanguard 500 and 00108WAF7

Can any of the company-specific risk be diversified away by investing in both Vanguard 500 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 Vanguard 500 and 00108WAF7 into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Vanguard 500 Index and AEP TEX INC, you can compare the effects of market volatilities on Vanguard 500 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 Vanguard 500 with a short position of 00108WAF7. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard 500 and 00108WAF7.

Diversification Opportunities for Vanguard 500 and 00108WAF7

-0.27

Correlation Coefficient

Vanguard 500  00108WAF7

Very good diversification

The 3 months correlation between VANGUARD and 00108WAF7 is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard 500 Index 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 Vanguard 500 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 Vanguard 500 Index 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 Vanguard 500 i.e., Vanguard 500 and 00108WAF7 go up and down completely randomly.

Pair Corralation between Vanguard 500 and 00108WAF7

Assuming the 90 days horizon Vanguard 500 is expected to generate 494.81 times less return on investment than 00108WAF7. But when comparing it to its historical volatility, Vanguard 500 Index is 197.33 times less risky than 00108WAF7. It trades about 0.06 of its potential returns per unit of risk. AEP TEX INC is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  7,677  in AEP TEX INC on October 4, 2024 and sell it today you would earn a total of  544.00  from holding AEP TEX INC or generate 7.09% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	67.74%
Values	Daily Returns

Vanguard 500 Index  vs.  AEP TEX INC

Vanguard 500 Index

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard 500 Index are ranked lower than 4 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Vanguard 500 is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

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.

Pair Trading with Vanguard 500 and 00108WAF7

The main advantage of trading using opposite Vanguard 500 and 00108WAF7 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard 500 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 Vanguard 500 Index 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.