Correlation Between AES Corp and Booking Holdings

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

By analyzing existing cross correlation between AES Corp and Booking Holdings, you can compare the effects of market volatilities on AES Corp and Booking Holdings 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 Booking Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of AES Corp and Booking Holdings.

Diversification Opportunities for AES Corp and Booking Holdings

-0.73

Correlation Coefficient

AES Corp  Booking Holdings

Pay attention - limited upside

The 3 months correlation between AES and Booking is -0.73. Overlapping area represents the amount of risk that can be diversified away by holding AES Corp and Booking Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Booking Holdings 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 Booking Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Booking Holdings has no effect on the direction of AES Corp i.e., AES Corp and Booking Holdings go up and down completely randomly.

Pair Corralation between AES Corp and Booking Holdings

Assuming the 90 days trading horizon AES Corp is expected to under-perform the Booking Holdings. In addition to that, AES Corp is 2.02 times more volatile than Booking Holdings. It trades about -0.24 of its total potential returns per unit of risk. Booking Holdings is currently generating about -0.36 per unit of volatility. If you would invest  521,727  in Booking Holdings on October 11, 2024 and sell it today you would lose (37,822) from holding Booking Holdings or give up 7.25% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	95.0%
Values	Daily Returns

AES Corp  vs.  Booking Holdings

AES Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days AES Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in February 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Booking Holdings

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Booking Holdings are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Booking Holdings unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with AES Corp and Booking Holdings

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

The idea behind AES Corp and Booking Holdings 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.