Correlation Between CVR Energy and AES Corp
Can any of the company-specific risk be diversified away by investing in both CVR Energy and AES Corp 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 CVR Energy and AES Corp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between CVR Energy and AES Corp, you can compare the effects of market volatilities on CVR Energy and AES Corp 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 CVR Energy with a short position of AES Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of CVR Energy and AES Corp.
Diversification Opportunities for CVR Energy and AES Corp
0.72 | Correlation Coefficient |
Poor diversification
The 3 months correlation between CVR and AES is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding CVR Energy and AES Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AES Corp and CVR Energy 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 CVR Energy are associated (or correlated) with AES Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AES Corp has no effect on the direction of CVR Energy i.e., CVR Energy and AES Corp go up and down completely randomly.
Pair Corralation between CVR Energy and AES Corp
Assuming the 90 days trading horizon CVR Energy is expected to under-perform the AES Corp. In addition to that, CVR Energy is 1.29 times more volatile than AES Corp. It trades about -0.04 of its total potential returns per unit of risk. AES Corp is currently generating about -0.05 per unit of volatility. If you would invest 1,734 in AES Corp on October 10, 2024 and sell it today you would lose (510.00) from holding AES Corp or give up 29.41% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Significant |
Accuracy | 96.41% |
Values | Daily Returns |
CVR Energy vs. AES Corp
Performance |
Timeline |
CVR Energy |
AES Corp |
CVR Energy and AES Corp Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with CVR Energy and AES Corp
The main advantage of trading using opposite CVR Energy and AES Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CVR Energy position performs unexpectedly, AES Corp 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 AES Corp will offset losses from the drop in AES Corp's long position.CVR Energy vs. Zegona Communications Plc | CVR Energy vs. AcadeMedia AB | CVR Energy vs. Aeorema Communications Plc | CVR Energy vs. Atresmedia |
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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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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