Correlation Between AES and Artesian Resources
Can any of the company-specific risk be diversified away by investing in both AES and Artesian Resources 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 AES and Artesian Resources into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between The AES and Artesian Resources, you can compare the effects of market volatilities on AES and Artesian Resources 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 AES with a short position of Artesian Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of AES and Artesian Resources.
Diversification Opportunities for AES and Artesian Resources
0.6 | Correlation Coefficient |
Poor diversification
The 3 months correlation between AES and Artesian is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding The AES and Artesian Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Artesian Resources and AES 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 The AES are associated (or correlated) with Artesian Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Artesian Resources has no effect on the direction of AES i.e., AES and Artesian Resources go up and down completely randomly.
Pair Corralation between AES and Artesian Resources
Considering the 90-day investment horizon The AES is expected to under-perform the Artesian Resources. In addition to that, AES is 1.31 times more volatile than Artesian Resources. It trades about -0.32 of its total potential returns per unit of risk. Artesian Resources is currently generating about -0.02 per unit of volatility. If you would invest 3,133 in Artesian Resources on November 3, 2024 and sell it today you would lose (33.00) from holding Artesian Resources or give up 1.05% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
The AES vs. Artesian Resources
Performance |
| Timeline |
| AES |
| Artesian Resources |
AES and Artesian Resources Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with AES and Artesian Resources
The main advantage of trading using opposite AES and Artesian Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AES position performs unexpectedly, Artesian Resources 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 Artesian Resources will offset losses from the drop in Artesian Resources' long position.The idea behind The AES and Artesian Resources 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.| Artesian Resources vs. California Water Service | Artesian Resources vs. SJW Group Common | Artesian Resources vs. The York Water | Artesian Resources vs. American States Water |
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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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