Correlation Between EON SE and AES Corp

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

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

Diversification Opportunities for EON SE and AES Corp

0.28

Correlation Coefficient

EON SE  AES Corp

Modest diversification

The 3 months correlation between EON and AES is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding EON SE ADR and AES Corp Unit in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AES Corp Unit and EON SE 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 EON SE ADR 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 Unit has no effect on the direction of EON SE i.e., EON SE and AES Corp go up and down completely randomly.

Pair Corralation between EON SE and AES Corp

If you would invest  8,525  in AES Corp Unit on August 31, 2024 and sell it today you would lose (29.00) from holding AES Corp Unit or give up 0.34% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	1.89%
Values	Daily Returns

EON SE ADR  vs.  AES Corp Unit

EON SE ADR

Risk-Adjusted Performance

0 of 100

Very Weak

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

AES Corp Unit

Risk-Adjusted Performance

0 of 100

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

Pair Trading with EON SE and AES Corp

The main advantage of trading using opposite EON SE and AES Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if EON SE 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.

The idea behind EON SE ADR and AES Corp Unit 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.