Correlation Between AES and EuroSite Power
Can any of the company-specific risk be diversified away by investing in both AES and EuroSite Power 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 EuroSite Power into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between The AES and EuroSite Power, you can compare the effects of market volatilities on AES and EuroSite Power 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 EuroSite Power. Check out your portfolio center. Please also check ongoing floating volatility patterns of AES and EuroSite Power.
Diversification Opportunities for AES and EuroSite Power
0.13 | Correlation Coefficient |
Average diversification
The 3 months correlation between AES and EuroSite is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding The AES and EuroSite Power in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EuroSite Power 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 EuroSite Power. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EuroSite Power has no effect on the direction of AES i.e., AES and EuroSite Power go up and down completely randomly.
Pair Corralation between AES and EuroSite Power
Considering the 90-day investment horizon The AES is expected to under-perform the EuroSite Power. But the stock apears to be less risky and, when comparing its historical volatility, The AES is 4.05 times less risky than EuroSite Power. The stock trades about -0.05 of its potential returns per unit of risk. The EuroSite Power is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 5.00 in EuroSite Power on September 13, 2024 and sell it today you would earn a total of 0.00 from holding EuroSite Power or generate 0.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
The AES vs. EuroSite Power
Performance |
| Timeline |
| AES |
| EuroSite Power |
AES and EuroSite Power Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with AES and EuroSite Power
The main advantage of trading using opposite AES and EuroSite Power positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AES position performs unexpectedly, EuroSite Power 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 EuroSite Power will offset losses from the drop in EuroSite Power's long position.The idea behind The AES and EuroSite Power 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.| EuroSite Power vs. American Electric Power | EuroSite Power vs. FirstEnergy | EuroSite Power vs. Entergy | EuroSite Power vs. Southern Company |
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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.
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