Correlation Between Canadian Utilities and AES
Can any of the company-specific risk be diversified away by investing in both Canadian Utilities and AES 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 Canadian Utilities and AES into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Canadian Utilities Limited and The AES, you can compare the effects of market volatilities on Canadian Utilities and AES 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 Canadian Utilities with a short position of AES. Check out your portfolio center. Please also check ongoing floating volatility patterns of Canadian Utilities and AES.
Diversification Opportunities for Canadian Utilities and AES
0.51 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Canadian and AES is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding Canadian Utilities Limited and The AES in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AES and Canadian Utilities 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 Canadian Utilities Limited are associated (or correlated) with AES. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AES has no effect on the direction of Canadian Utilities i.e., Canadian Utilities and AES go up and down completely randomly.
Pair Corralation between Canadian Utilities and AES
Assuming the 90 days horizon Canadian Utilities Limited is expected to generate 0.31 times more return on investment than AES. However, Canadian Utilities Limited is 3.25 times less risky than AES. It trades about 0.03 of its potential returns per unit of risk. The AES is currently generating about -0.33 per unit of risk. If you would invest 2,562 in Canadian Utilities Limited on August 28, 2024 and sell it today you would earn a total of 13.00 from holding Canadian Utilities Limited or generate 0.51% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Canadian Utilities Limited vs. The AES
Performance |
| Timeline |
| Canadian Utilities |
| AES |
Canadian Utilities and AES Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Canadian Utilities and AES
The main advantage of trading using opposite Canadian Utilities and AES positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Canadian Utilities position performs unexpectedly, AES 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 AES will offset losses from the drop in AES's long position.| Canadian Utilities vs. TransAlta Corp | Canadian Utilities vs. Pampa Energia SA | Canadian Utilities vs. Vistra Energy Corp | Canadian Utilities vs. NRG Energy |
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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.
Other Complementary Tools
| Price Ceiling Movement Calculate and plot Price Ceiling Movement for different equity instruments | |
| Risk-Return Analysis View associations between returns expected from investment and the risk you assume | |
| Commodity Directory Find actively traded commodities issued by global exchanges | |
| Portfolio Optimization Compute new portfolio that will generate highest expected return given your specified tolerance for risk | |
| Portfolio Volatility Check portfolio volatility and analyze historical return density to properly model market risk |