Correlation Between AES and Maxim Power

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

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

Diversification Opportunities for AES and Maxim Power

-0.89

Correlation Coefficient

AES  Maxim Power

Pay attention - limited upside

The 3 months correlation between AES and Maxim is -0.89. Overlapping area represents the amount of risk that can be diversified away by holding The AES and Maxim Power Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Maxim Power Corp 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 Maxim Power. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Maxim Power Corp has no effect on the direction of AES i.e., AES and Maxim Power go up and down completely randomly.

Pair Corralation between AES and Maxim Power

Considering the 90-day investment horizon The AES is expected to under-perform the Maxim Power. In addition to that, AES is 1.02 times more volatile than Maxim Power Corp. It trades about -0.23 of its total potential returns per unit of risk. Maxim Power Corp is currently generating about 0.16 per unit of volatility. If you would invest  284.00  in Maxim Power Corp on October 3, 2024 and sell it today you would earn a total of  74.00  from holding Maxim Power Corp or generate 26.06% return on investment over 90 days.

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

The AES  vs.  Maxim Power Corp

AES

Risk-Adjusted Performance

0 of 100

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 unsteady performance in the last few months, the Stock's technical and fundamental indicators remain comparatively stable which may send shares a bit higher in February 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Maxim Power Corp

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Maxim Power Corp are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile technical and fundamental indicators, Maxim Power reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with AES and Maxim Power

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

The idea behind The AES and Maxim Power 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.