Correlation Between AES and Power Assets
Can any of the company-specific risk be diversified away by investing in both AES and Power Assets 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 Power Assets into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between The AES and Power Assets Holdings, you can compare the effects of market volatilities on AES and Power Assets 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 Power Assets. Check out your portfolio center. Please also check ongoing floating volatility patterns of AES and Power Assets.
Diversification Opportunities for AES and Power Assets
0.15 | Correlation Coefficient |
Average diversification
The 3 months correlation between AES and Power is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding The AES and Power Assets Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Power Assets Holdings 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 Power Assets. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Power Assets Holdings has no effect on the direction of AES i.e., AES and Power Assets go up and down completely randomly.
Pair Corralation between AES and Power Assets
Considering the 90-day investment horizon The AES is expected to under-perform the Power Assets. In addition to that, AES is 1.55 times more volatile than Power Assets Holdings. It trades about -0.14 of its total potential returns per unit of risk. Power Assets Holdings is currently generating about 0.02 per unit of volatility. If you would invest 651.00 in Power Assets Holdings on September 22, 2024 and sell it today you would earn a total of 2.00 from holding Power Assets Holdings or generate 0.31% 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. Power Assets Holdings
Performance |
| Timeline |
| AES |
| Power Assets Holdings |
AES and Power Assets Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with AES and Power Assets
The main advantage of trading using opposite AES and Power Assets positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AES position performs unexpectedly, Power Assets 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 Power Assets will offset losses from the drop in Power Assets' long position.The idea behind The AES and Power Assets Holdings 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.| Power Assets vs. Energy of Minas | Power Assets vs. Avista | Power Assets vs. Allete Inc | Power Assets vs. The AES |
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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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