Correlation Between Rocky Brands and AES Corp

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

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

Diversification Opportunities for Rocky Brands and AES Corp

0.67

Correlation Coefficient

Rocky Brands  AES Corp

Poor diversification

The 3 months correlation between Rocky and AES is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Rocky Brands 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 Rocky Brands 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 Rocky Brands 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 Rocky Brands i.e., Rocky Brands and AES Corp go up and down completely randomly.

Pair Corralation between Rocky Brands and AES Corp

Given the investment horizon of 90 days Rocky Brands is expected to generate 3.18 times more return on investment than AES Corp. However, Rocky Brands is 3.18 times more volatile than AES Corp Unit. It trades about 0.01 of its potential returns per unit of risk. AES Corp Unit is currently generating about -0.04 per unit of risk. If you would invest  3,000  in Rocky Brands on October 25, 2024 and sell it today you would lose (506.00) from holding Rocky Brands or give up 16.87% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	23.94%
Values	Daily Returns

Rocky Brands  vs.  AES Corp Unit

Rocky Brands

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Rocky Brands has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong forward-looking signals, Rocky Brands is not utilizing all of its potentials. The current 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 Rocky Brands and AES Corp

The main advantage of trading using opposite Rocky Brands and AES Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Rocky Brands 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 Rocky Brands 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.