Correlation Between American Electric and AES Corp
Can any of the company-specific risk be diversified away by investing in both American Electric 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 American Electric and AES Corp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between American Electric Power and AES Corp Unit, you can compare the effects of market volatilities on American Electric 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 American Electric with a short position of AES Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Electric and AES Corp.
Diversification Opportunities for American Electric and AES Corp
0.89 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between American and AES is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding American Electric Power 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 American Electric 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 American Electric Power 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 American Electric i.e., American Electric and AES Corp go up and down completely randomly.
Pair Corralation between American Electric and AES Corp
If you would invest 8,496 in AES Corp Unit on August 30, 2024 and sell it today you would earn a total of 0.00 from holding AES Corp Unit or generate 0.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
American Electric Power vs. AES Corp Unit
Performance |
| Timeline |
| American Electric Power |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
| AES Corp Unit |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
American Electric and AES Corp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Electric and AES Corp
The main advantage of trading using opposite American Electric and AES Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Electric 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 American Electric Power 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.| AES Corp vs. Playtika Holding Corp | AES Corp vs. Funko Inc | AES Corp vs. Hasbro Inc | AES Corp vs. Molson Coors Brewing |
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 CEOs Directory module to screen CEOs from public companies around the world.
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