Correlation Between AES and Energy Of

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

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

Diversification Opportunities for AES and Energy Of

-0.5

Correlation Coefficient

AES  Energy Of

Very good diversification

The 3 months correlation between AES and Energy is -0.5. Overlapping area represents the amount of risk that can be diversified away by holding The AES and Energy of Minas in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Energy of Minas and AES 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 The AES are associated (or correlated) with Energy Of. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Energy of Minas has no effect on the direction of AES i.e., AES and Energy Of go up and down completely randomly.

Pair Corralation between AES and Energy Of

Considering the 90-day investment horizon AES is expected to generate 7.02 times less return on investment than Energy Of. In addition to that, AES is 1.08 times more volatile than Energy of Minas. It trades about 0.01 of its total potential returns per unit of risk. Energy of Minas is currently generating about 0.06 per unit of volatility. If you would invest  234.00  in Energy of Minas on December 27, 2024 and sell it today you would earn a total of  19.00  from holding Energy of Minas or generate 8.12% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

The AES  vs.  Energy of Minas

AES

Risk-Adjusted Performance

Very Weak

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

Energy of Minas

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Energy of Minas are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile basic indicators, Energy Of may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with AES and Energy Of

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

The idea behind The AES and Energy of Minas 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.