Correlation Between Better Choice and 00108WAF7

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Can any of the company-specific risk be diversified away by investing in both Better Choice 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 Better Choice and 00108WAF7 into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Better Choice and AEP TEX INC, you can compare the effects of market volatilities on Better Choice 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 Better Choice with a short position of 00108WAF7. Check out your portfolio center. Please also check ongoing floating volatility patterns of Better Choice and 00108WAF7.

Diversification Opportunities for Better Choice and 00108WAF7

-0.19
  Correlation Coefficient

Good diversification

The 3 months correlation between Better and 00108WAF7 is -0.19. Overlapping area represents the amount of risk that can be diversified away by holding Better Choice 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 Better Choice 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 Better Choice 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 Better Choice i.e., Better Choice and 00108WAF7 go up and down completely randomly.

Pair Corralation between Better Choice and 00108WAF7

Given the investment horizon of 90 days Better Choice is expected to under-perform the 00108WAF7. In addition to that, Better Choice is 3.69 times more volatile than AEP TEX INC. It trades about -0.13 of its total potential returns per unit of risk. AEP TEX INC is currently generating about 0.27 per unit of volatility. If you would invest  7,097  in AEP TEX INC on November 9, 2024 and sell it today you would earn a total of  301.00  from holding AEP TEX INC or generate 4.24% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy85.0%
ValuesDaily Returns

Better Choice  vs.  AEP TEX INC

 Performance 
       Timeline  
Better Choice 

Risk-Adjusted Performance

Very Weak

 
Weak
 
Strong
Over the last 90 days Better Choice has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Better Choice is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.
AEP TEX INC 

Risk-Adjusted Performance

Very Weak

 
Weak
 
Strong
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 current stock price disturbance, may contribute to short-term losses for the investors.

Better Choice and 00108WAF7 Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Better Choice and 00108WAF7

The main advantage of trading using opposite Better Choice and 00108WAF7 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Better Choice 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.
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The idea behind Better Choice 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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Check out your portfolio center.
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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.

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