Correlation Between 00108WAF7 and 87612GAA9

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Can any of the company-specific risk be diversified away by investing in both 00108WAF7 and 87612GAA9 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 87612GAA9 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 TRGP 42 01 FEB 33, you can compare the effects of market volatilities on 00108WAF7 and 87612GAA9 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 87612GAA9. Check out your portfolio center. Please also check ongoing floating volatility patterns of 00108WAF7 and 87612GAA9.

Diversification Opportunities for 00108WAF7 and 87612GAA9

0.32
  Correlation Coefficient

Weak diversification

The 3 months correlation between 00108WAF7 and 87612GAA9 is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding AEP TEX INC and TRGP 42 01 FEB 33 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TRGP 42 01 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 87612GAA9. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TRGP 42 01 has no effect on the direction of 00108WAF7 i.e., 00108WAF7 and 87612GAA9 go up and down completely randomly.

Pair Corralation between 00108WAF7 and 87612GAA9

Assuming the 90 days trading horizon AEP TEX INC is expected to generate 1.46 times more return on investment than 87612GAA9. However, 00108WAF7 is 1.46 times more volatile than TRGP 42 01 FEB 33. It trades about 0.1 of its potential returns per unit of risk. TRGP 42 01 FEB 33 is currently generating about -0.01 per unit of risk. If you would invest  7,270  in AEP TEX INC on July 26, 2025 and sell it today you would earn a total of  328.00  from holding AEP TEX INC or generate 4.51% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy59.02%
ValuesDaily Returns

AEP TEX INC  vs.  TRGP 42 01 FEB 33

 Performance 
       Timeline  
AEP TEX INC 

Risk-Adjusted Performance

Good

 
Weak
 
Strong
Compared to the overall equity markets, risk-adjusted returns on investments in AEP TEX INC are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat fragile basic indicators, 00108WAF7 may actually be approaching a critical reversion point that can send shares even higher in November 2025.
TRGP 42 01 

Risk-Adjusted Performance

Weakest

 
Weak
 
Strong
Over the last 90 days TRGP 42 01 FEB 33 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, 87612GAA9 is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

00108WAF7 and 87612GAA9 Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with 00108WAF7 and 87612GAA9

The main advantage of trading using opposite 00108WAF7 and 87612GAA9 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if 00108WAF7 position performs unexpectedly, 87612GAA9 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 87612GAA9 will offset losses from the drop in 87612GAA9's long position.
The idea behind AEP TEX INC and TRGP 42 01 FEB 33 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.

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