Correlation Between Empire Metals and AES Corp
Can any of the company-specific risk be diversified away by investing in both Empire Metals 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 Empire Metals and AES Corp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Empire Metals Limited and AES Corp, you can compare the effects of market volatilities on Empire Metals 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 Empire Metals with a short position of AES Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Empire Metals and AES Corp.
Diversification Opportunities for Empire Metals and AES Corp
0.81 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Empire and AES is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Empire Metals Limited and AES Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AES Corp and Empire Metals 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 Empire Metals Limited 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 has no effect on the direction of Empire Metals i.e., Empire Metals and AES Corp go up and down completely randomly.
Pair Corralation between Empire Metals and AES Corp
Assuming the 90 days trading horizon Empire Metals Limited is expected to generate 1.33 times more return on investment than AES Corp. However, Empire Metals is 1.33 times more volatile than AES Corp. It trades about -0.1 of its potential returns per unit of risk. AES Corp is currently generating about -0.27 per unit of risk. If you would invest 810.00 in Empire Metals Limited on September 26, 2024 and sell it today you would lose (155.00) from holding Empire Metals Limited or give up 19.14% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Strong |
Accuracy | 100.0% |
Values | Daily Returns |
Empire Metals Limited vs. AES Corp
Performance |
Timeline |
Empire Metals Limited |
AES Corp |
Empire Metals and AES Corp Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Empire Metals and AES Corp
The main advantage of trading using opposite Empire Metals and AES Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Empire Metals 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.Empire Metals vs. Givaudan SA | Empire Metals vs. Antofagasta PLC | Empire Metals vs. Ferrexpo PLC | Empire Metals vs. Atalaya Mining |
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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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.
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