Correlation Between AES Corp and Electricite

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

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

Diversification Opportunities for AES Corp and Electricite

0.0

Correlation Coefficient

AES Corp  Electricite

Pay attention - limited upside

The 3 months correlation between AES and Electricite is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding AES Corp Unit and Electricite De France in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Electricite De France and AES Corp 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 AES Corp Unit are associated (or correlated) with Electricite. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Electricite De France has no effect on the direction of AES Corp i.e., AES Corp and Electricite go up and down completely randomly.

Pair Corralation between AES Corp and Electricite

If you would invest (100.00) in Electricite De France on December 30, 2024 and sell it today you would earn a total of  100.00  from holding Electricite De France or generate -100.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

AES Corp Unit  vs.  Electricite De France

AES Corp Unit

Risk-Adjusted Performance

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 recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Electricite De France

Risk-Adjusted Performance

Very Weak

Over the last 90 days Electricite De France has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong technical and fundamental indicators, Electricite is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with AES Corp and Electricite

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

The idea behind AES Corp Unit and Electricite De France 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.