Correlation Between AES Corp and Sligro Food

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

By analyzing existing cross correlation between AES Corp and Sligro Food Group, you can compare the effects of market volatilities on AES Corp and Sligro Food 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 AES Corp with a short position of Sligro Food. Check out your portfolio center. Please also check ongoing floating volatility patterns of AES Corp and Sligro Food.

Diversification Opportunities for AES Corp and Sligro Food

0.24

Correlation Coefficient

AES Corp  Sligro Food

Modest diversification

The 3 months correlation between AES and Sligro is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding AES Corp and Sligro Food Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sligro Food Group and AES Corp 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 AES Corp are associated (or correlated) with Sligro Food. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sligro Food Group has no effect on the direction of AES Corp i.e., AES Corp and Sligro Food go up and down completely randomly.

Pair Corralation between AES Corp and Sligro Food

Assuming the 90 days trading horizon AES Corp is expected to generate 2.0 times more return on investment than Sligro Food. However, AES Corp is 2.0 times more volatile than Sligro Food Group. It trades about 0.03 of its potential returns per unit of risk. Sligro Food Group is currently generating about 0.03 per unit of risk. If you would invest  1,280  in AES Corp on December 21, 2024 and sell it today you would earn a total of  30.00  from holding AES Corp or generate 2.34% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	96.72%
Values	Daily Returns

AES Corp  vs.  Sligro Food Group

AES Corp

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in AES Corp are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, AES Corp is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Sligro Food Group

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Sligro Food Group are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Sligro Food is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with AES Corp and Sligro Food

The main advantage of trading using opposite AES Corp and Sligro Food positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AES Corp position performs unexpectedly, Sligro Food 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 Sligro Food will offset losses from the drop in Sligro Food's long position.

The idea behind AES Corp and Sligro Food Group 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.

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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.