Correlation Between AES Brasil and Dow Jones
Can any of the company-specific risk be diversified away by investing in both AES Brasil and Dow Jones 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 Brasil and Dow Jones into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between AES Brasil Energia and Dow Jones Industrial, you can compare the effects of market volatilities on AES Brasil and Dow Jones 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 Brasil with a short position of Dow Jones. Check out your portfolio center. Please also check ongoing floating volatility patterns of AES Brasil and Dow Jones.
Diversification Opportunities for AES Brasil and Dow Jones
-0.22 | Correlation Coefficient |
Very good diversification
The 3 months correlation between AES and Dow is -0.22. Overlapping area represents the amount of risk that can be diversified away by holding AES Brasil Energia and Dow Jones Industrial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dow Jones Industrial and AES Brasil 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 AES Brasil Energia are associated (or correlated) with Dow Jones. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dow Jones Industrial has no effect on the direction of AES Brasil i.e., AES Brasil and Dow Jones go up and down completely randomly.
Pair Corralation between AES Brasil and Dow Jones
Assuming the 90 days trading horizon AES Brasil Energia is expected to under-perform the Dow Jones. In addition to that, AES Brasil is 2.9 times more volatile than Dow Jones Industrial. It trades about -0.56 of its total potential returns per unit of risk. Dow Jones Industrial is currently generating about 0.22 per unit of volatility. If you would invest 4,238,757 in Dow Jones Industrial on August 27, 2024 and sell it today you would earn a total of 190,894 from holding Dow Jones Industrial or generate 4.5% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 23.81% |
| Values | Daily Returns |
AES Brasil Energia vs. Dow Jones Industrial
Performance |
| Timeline |
AES Brasil and Dow Jones Volatility Contrast
Predicted Return Density |
| Returns |
AES Brasil Energia
Pair trading matchups for AES Brasil
Dow Jones Industrial
Pair trading matchups for Dow Jones
Pair Trading with AES Brasil and Dow Jones
The main advantage of trading using opposite AES Brasil and Dow Jones positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AES Brasil position performs unexpectedly, Dow Jones 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 Dow Jones will offset losses from the drop in Dow Jones' long position.| AES Brasil vs. Equatorial Energia SA | AES Brasil vs. Energisa SA | AES Brasil vs. Transmissora Aliana de | AES Brasil vs. CTEEP Companhia |
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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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.
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