Correlation Between Mitie Group and AES
Can any of the company-specific risk be diversified away by investing in both Mitie Group 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 Mitie Group and AES into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Mitie Group PLC and The AES, you can compare the effects of market volatilities on Mitie Group 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 Mitie Group with a short position of AES. Check out your portfolio center. Please also check ongoing floating volatility patterns of Mitie Group and AES.
Diversification Opportunities for Mitie Group and AES
0.67 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Mitie and AES is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Mitie Group PLC and The AES in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AES and Mitie Group 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 Mitie Group PLC 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 Mitie Group i.e., Mitie Group and AES go up and down completely randomly.
Pair Corralation between Mitie Group and AES
Assuming the 90 days horizon Mitie Group PLC is expected to generate 1.12 times more return on investment than AES. However, Mitie Group is 1.12 times more volatile than The AES. It trades about -0.03 of its potential returns per unit of risk. The AES is currently generating about -0.37 per unit of risk. If you would invest 119,850 in Mitie Group PLC on August 28, 2024 and sell it today you would lose (3,650) from holding Mitie Group PLC or give up 3.05% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.45% |
| Values | Daily Returns |
Mitie Group PLC vs. The AES
Performance |
| Timeline |
| Mitie Group PLC |
| AES |
Mitie Group and AES Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Mitie Group and AES
The main advantage of trading using opposite Mitie Group and AES positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Mitie Group 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.| Mitie Group vs. Apollo Investment Corp | Mitie Group vs. SMA Solar Technology | Mitie Group vs. DXC Technology Co | Mitie Group vs. AECOM TECHNOLOGY |
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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