Correlation Between GoldMining and AES Corp

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

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

Diversification Opportunities for GoldMining and AES Corp

0.71

Correlation Coefficient

GoldMining  AES Corp

Poor diversification

The 3 months correlation between GoldMining and AES is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding GoldMining and AES Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AES Corp and GoldMining 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 GoldMining 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 GoldMining i.e., GoldMining and AES Corp go up and down completely randomly.

Pair Corralation between GoldMining and AES Corp

Assuming the 90 days trading horizon GoldMining is expected to generate 0.87 times more return on investment than AES Corp. However, GoldMining is 1.15 times less risky than AES Corp. It trades about 0.06 of its potential returns per unit of risk. AES Corp is currently generating about 0.02 per unit of risk. If you would invest  115.00  in GoldMining on December 23, 2024 and sell it today you would earn a total of  6.00  from holding GoldMining or generate 5.22% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	65.57%
Values	Daily Returns

GoldMining  vs.  AES Corp

GoldMining

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in GoldMining are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, GoldMining may actually be approaching a critical reversion point that can send shares even higher in April 2025.

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.

Pair Trading with GoldMining and AES Corp

The main advantage of trading using opposite GoldMining and AES Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GoldMining 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.

The idea behind GoldMining and AES Corp 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.