Correlation Between AEGEAN AIRLINES and RWE Aktiengesellscha

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

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

Diversification Opportunities for AEGEAN AIRLINES and RWE Aktiengesellscha

-0.43

Correlation Coefficient

AEGEAN AIRLINES  RWE Aktiengesellscha

Very good diversification

The 3 months correlation between AEGEAN and RWE is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding AEGEAN AIRLINES and RWE Aktiengesellschaft in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RWE Aktiengesellschaft and AEGEAN AIRLINES 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 AEGEAN AIRLINES are associated (or correlated) with RWE Aktiengesellscha. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RWE Aktiengesellschaft has no effect on the direction of AEGEAN AIRLINES i.e., AEGEAN AIRLINES and RWE Aktiengesellscha go up and down completely randomly.

Pair Corralation between AEGEAN AIRLINES and RWE Aktiengesellscha

Assuming the 90 days trading horizon AEGEAN AIRLINES is expected to generate 0.73 times more return on investment than RWE Aktiengesellscha. However, AEGEAN AIRLINES is 1.36 times less risky than RWE Aktiengesellscha. It trades about 0.09 of its potential returns per unit of risk. RWE Aktiengesellschaft is currently generating about -0.05 per unit of risk. If you would invest  1,009  in AEGEAN AIRLINES on October 26, 2024 and sell it today you would earn a total of  74.00  from holding AEGEAN AIRLINES or generate 7.33% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.33%
Values	Daily Returns

AEGEAN AIRLINES  vs.  RWE Aktiengesellschaft

AEGEAN AIRLINES

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in AEGEAN AIRLINES are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain basic indicators, AEGEAN AIRLINES may actually be approaching a critical reversion point that can send shares even higher in February 2025.

RWE Aktiengesellschaft

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days RWE Aktiengesellschaft has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain performance, the Stock's technical and fundamental indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with AEGEAN AIRLINES and RWE Aktiengesellscha

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

The idea behind AEGEAN AIRLINES and RWE Aktiengesellschaft 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.