Correlation Between Adient PLC and AES Corp

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

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

Diversification Opportunities for Adient PLC and AES Corp

-0.08

Correlation Coefficient

Adient PLC  AES Corp

Good diversification

The 3 months correlation between Adient and AES is -0.08. Overlapping area represents the amount of risk that can be diversified away by holding Adient PLC and AES Corp Unit in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AES Corp Unit and Adient PLC 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 Adient PLC 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 Unit has no effect on the direction of Adient PLC i.e., Adient PLC and AES Corp go up and down completely randomly.

Pair Corralation between Adient PLC and AES Corp

Given the investment horizon of 90 days Adient PLC is expected to under-perform the AES Corp. In addition to that, Adient PLC is 1.09 times more volatile than AES Corp Unit. It trades about -0.08 of its total potential returns per unit of risk. AES Corp Unit is currently generating about -0.07 per unit of volatility. If you would invest  8,553  in AES Corp Unit on September 12, 2024 and sell it today you would lose (57.00) from holding AES Corp Unit or give up 0.67% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	1.14%
Values	Daily Returns

Adient PLC  vs.  AES Corp Unit

Adient PLC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Adient PLC has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Adient PLC is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

AES Corp Unit

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days AES Corp Unit has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, AES Corp is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Adient PLC and AES Corp

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

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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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.