Correlation Between Brookfield Infrastructure and AES

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

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

Diversification Opportunities for Brookfield Infrastructure and AES

-0.46

Correlation Coefficient

Brookfield Infrastructure  AES

Very good diversification

The 3 months correlation between Brookfield and AES is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding Brookfield Infrastructure Part and The AES in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AES and Brookfield Infrastructure 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 Brookfield Infrastructure Partners are associated (or correlated) with AES. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AES has no effect on the direction of Brookfield Infrastructure i.e., Brookfield Infrastructure and AES go up and down completely randomly.

Pair Corralation between Brookfield Infrastructure and AES

Considering the 90-day investment horizon Brookfield Infrastructure Partners is expected to under-perform the AES. But the stock apears to be less risky and, when comparing its historical volatility, Brookfield Infrastructure Partners is 1.5 times less risky than AES. The stock trades about -0.05 of its potential returns per unit of risk. The The AES is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  1,245  in The AES on December 28, 2024 and sell it today you would lose (4.00) from holding The AES or give up 0.32% of portfolio value over 90 days.

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

Brookfield Infrastructure Part  vs.  The AES

Brookfield Infrastructure

Risk-Adjusted Performance

Very Weak

Over the last 90 days Brookfield Infrastructure Partners has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable forward indicators, Brookfield Infrastructure is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

AES

Risk-Adjusted Performance

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 latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Brookfield Infrastructure and AES

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

The idea behind Brookfield Infrastructure Partners and The AES 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.