Correlation Between Basic Materials and AES Brasil
Can any of the company-specific risk be diversified away by investing in both Basic Materials and AES Brasil 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 Basic Materials and AES Brasil into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Basic Materials and AES Brasil Energia, you can compare the effects of market volatilities on Basic Materials and AES Brasil 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 Basic Materials with a short position of AES Brasil. Check out your portfolio center. Please also check ongoing floating volatility patterns of Basic Materials and AES Brasil.
Diversification Opportunities for Basic Materials and AES Brasil
0.56 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Basic and AES is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding Basic Materials and AES Brasil Energia in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AES Brasil Energia and Basic Materials 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 Basic Materials are associated (or correlated) with AES Brasil. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AES Brasil Energia has no effect on the direction of Basic Materials i.e., Basic Materials and AES Brasil go up and down completely randomly.
Pair Corralation between Basic Materials and AES Brasil
Assuming the 90 days trading horizon Basic Materials is expected to generate 0.33 times more return on investment than AES Brasil. However, Basic Materials is 2.99 times less risky than AES Brasil. It trades about 0.05 of its potential returns per unit of risk. AES Brasil Energia is currently generating about -0.19 per unit of risk. If you would invest 556,361 in Basic Materials on August 31, 2024 and sell it today you would earn a total of 20,759 from holding Basic Materials or generate 3.73% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 71.43% |
| Values | Daily Returns |
Basic Materials vs. AES Brasil Energia
Performance |
| Timeline |
Basic Materials and AES Brasil Volatility Contrast
Predicted Return Density |
| Returns |
Basic Materials
Pair trading matchups for Basic Materials
AES Brasil Energia
Pair trading matchups for AES Brasil
Pair Trading with Basic Materials and AES Brasil
The main advantage of trading using opposite Basic Materials and AES Brasil positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Basic Materials position performs unexpectedly, AES Brasil 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 Brasil will offset losses from the drop in AES Brasil's long position.| Basic Materials vs. Micron Technology | Basic Materials vs. Ross Stores | Basic Materials vs. Monster Beverage | Basic Materials vs. TAL Education Group |
| AES Brasil vs. CTEEP Companhia | AES Brasil vs. Transmissora Aliana de | AES Brasil vs. Engie Brasil Energia | AES Brasil vs. BB Seguridade Participacoes |
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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.
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