Correlation Between AES Corp and Hollywood Bowl

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

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

Diversification Opportunities for AES Corp and Hollywood Bowl

0.22

Correlation Coefficient

AES Corp  Hollywood Bowl

Modest diversification

The 3 months correlation between AES and Hollywood is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding AES Corp and Hollywood Bowl Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hollywood Bowl 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 Hollywood Bowl. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hollywood Bowl Group has no effect on the direction of AES Corp i.e., AES Corp and Hollywood Bowl go up and down completely randomly.

Pair Corralation between AES Corp and Hollywood Bowl

Assuming the 90 days trading horizon AES Corp is expected to generate 2.09 times more return on investment than Hollywood Bowl. However, AES Corp is 2.09 times more volatile than Hollywood Bowl Group. It trades about 0.02 of its potential returns per unit of risk. Hollywood Bowl Group is currently generating about -0.07 per unit of risk. If you would invest  1,280  in AES Corp on December 23, 2024 and sell it today you would earn a total of  10.00  from holding AES Corp or generate 0.78% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	96.83%
Values	Daily Returns

AES Corp  vs.  Hollywood Bowl 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 1 (%) 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.

Hollywood Bowl Group

Risk-Adjusted Performance

Very Weak

Over the last 90 days Hollywood Bowl Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Hollywood Bowl 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 Hollywood Bowl

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

The idea behind AES Corp and Hollywood Bowl 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..