Correlation Between Tegna and AAP
Can any of the company-specific risk be diversified away by investing in both Tegna and AAP 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 Tegna and AAP into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Tegna Inc and AAP Inc, you can compare the effects of market volatilities on Tegna and AAP 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 Tegna with a short position of AAP. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tegna and AAP.
Diversification Opportunities for Tegna and AAP
Weak diversification
The 3 months correlation between Tegna and AAP is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding Tegna Inc and AAP Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AAP Inc and Tegna 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 Tegna Inc are associated (or correlated) with AAP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AAP Inc has no effect on the direction of Tegna i.e., Tegna and AAP go up and down completely randomly.
Pair Corralation between Tegna and AAP
Given the investment horizon of 90 days Tegna is expected to generate 46.39 times less return on investment than AAP. But when comparing it to its historical volatility, Tegna Inc is 16.34 times less risky than AAP. It trades about 0.03 of its potential returns per unit of risk. AAP Inc is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 0.80 in AAP Inc on December 1, 2024 and sell it today you would lose (0.78) from holding AAP Inc or give up 97.5% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 99.6% |
| Values | Daily Returns |
Tegna Inc vs. AAP Inc
Performance |
| Timeline |
| Tegna Inc |
| AAP Inc |
Tegna and AAP Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Tegna and AAP
The main advantage of trading using opposite Tegna and AAP positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tegna position performs unexpectedly, AAP 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 AAP will offset losses from the drop in AAP's long position.| Tegna vs. E W Scripps | ||
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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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..
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