Correlation Between 00108WAF7 and United

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Can any of the company-specific risk be diversified away by investing in both 00108WAF7 and United 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 00108WAF7 and United into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between AEP TEX INC and United Rentals 55, you can compare the effects of market volatilities on 00108WAF7 and United 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 00108WAF7 with a short position of United. Check out your portfolio center. Please also check ongoing floating volatility patterns of 00108WAF7 and United.

Diversification Opportunities for 00108WAF7 and United

0.06
  Correlation Coefficient

Significant diversification

The 3 months correlation between 00108WAF7 and United is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding AEP TEX INC and United Rentals 55 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on United Rentals 55 and 00108WAF7 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 AEP TEX INC are associated (or correlated) with United. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of United Rentals 55 has no effect on the direction of 00108WAF7 i.e., 00108WAF7 and United go up and down completely randomly.

Pair Corralation between 00108WAF7 and United

Assuming the 90 days trading horizon AEP TEX INC is expected to generate 456.85 times more return on investment than United. However, 00108WAF7 is 456.85 times more volatile than United Rentals 55. It trades about 0.13 of its potential returns per unit of risk. United Rentals 55 is currently generating about -0.05 per unit of risk. If you would invest  7,607  in AEP TEX INC on September 2, 2024 and sell it today you would earn a total of  61.00  from holding AEP TEX INC or generate 0.8% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthInsignificant
Accuracy77.42%
ValuesDaily Returns

AEP TEX INC  vs.  United Rentals 55

 Performance 
       Timeline  
AEP TEX INC 

Risk-Adjusted Performance

10 of 100

 
Weak
 
Strong
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 inconsistent basic indicators, 00108WAF7 sustained solid returns over the last few months and may actually be approaching a breakup point.
United Rentals 55 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days United Rentals 55 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, United is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

00108WAF7 and United Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with 00108WAF7 and United

The main advantage of trading using opposite 00108WAF7 and United positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if 00108WAF7 position performs unexpectedly, United 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 United will offset losses from the drop in United's long position.
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The idea behind AEP TEX INC and United Rentals 55 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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.

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