Correlation Between CARRIER and 00108WAF7

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

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

Diversification Opportunities for CARRIER and 00108WAF7

-0.04

Correlation Coefficient

CARRIER  00108WAF7

Good diversification

The 3 months correlation between CARRIER and 00108WAF7 is -0.04. Overlapping area represents the amount of risk that can be diversified away by holding CARRIER GLOBAL P 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 CARRIER 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 CARRIER GLOBAL P 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 CARRIER i.e., CARRIER and 00108WAF7 go up and down completely randomly.

Pair Corralation between CARRIER and 00108WAF7

Assuming the 90 days trading horizon CARRIER GLOBAL P is expected to under-perform the 00108WAF7. But the bond apears to be less risky and, when comparing its historical volatility, CARRIER GLOBAL P is 217.07 times less risky than 00108WAF7. The bond trades about -0.05 of its potential returns per unit of risk. The AEP TEX INC is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  7,247  in AEP TEX INC on September 24, 2024 and sell it today you would earn a total of  421.00  from holding AEP TEX INC or generate 5.81% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	73.39%
Values	Daily Returns

CARRIER GLOBAL P  vs.  AEP TEX INC

CARRIER GLOBAL P

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CARRIER GLOBAL P has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Bond's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for CARRIER GLOBAL P 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 CARRIER and 00108WAF7

The main advantage of trading using opposite CARRIER and 00108WAF7 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CARRIER 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 CARRIER GLOBAL P 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.