Correlation Between AES and Entergy Mississippi
Can any of the company-specific risk be diversified away by investing in both AES and Entergy Mississippi 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 Entergy Mississippi into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between The AES and Entergy Mississippi LLC, you can compare the effects of market volatilities on AES and Entergy Mississippi 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 Entergy Mississippi. Check out your portfolio center. Please also check ongoing floating volatility patterns of AES and Entergy Mississippi.
Diversification Opportunities for AES and Entergy Mississippi
0.78 | Correlation Coefficient |
Poor diversification
The 3 months correlation between AES and Entergy is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding The AES and Entergy Mississippi LLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Entergy Mississippi LLC 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 Entergy Mississippi. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Entergy Mississippi LLC has no effect on the direction of AES i.e., AES and Entergy Mississippi go up and down completely randomly.
Pair Corralation between AES and Entergy Mississippi
Considering the 90-day investment horizon The AES is expected to under-perform the Entergy Mississippi. In addition to that, AES is 2.91 times more volatile than Entergy Mississippi LLC. It trades about -0.03 of its total potential returns per unit of risk. Entergy Mississippi LLC is currently generating about 0.02 per unit of volatility. If you would invest 2,109 in Entergy Mississippi LLC on August 31, 2024 and sell it today you would earn a total of 93.00 from holding Entergy Mississippi LLC or generate 4.41% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
The AES vs. Entergy Mississippi LLC
Performance |
| Timeline |
| AES |
| Entergy Mississippi LLC |
AES and Entergy Mississippi Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with AES and Entergy Mississippi
The main advantage of trading using opposite AES and Entergy Mississippi positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AES position performs unexpectedly, Entergy Mississippi 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 Entergy Mississippi will offset losses from the drop in Entergy Mississippi's long position.The idea behind The AES and Entergy Mississippi LLC 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.| Entergy Mississippi vs. Entergy Arkansas LLC | Entergy Mississippi vs. Entergy New Orleans | Entergy Mississippi vs. Entergy Louisiana LLC | Entergy Mississippi vs. Entergy New Orleans |
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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.
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