Correlation Between AES and Best Buy
Can any of the company-specific risk be diversified away by investing in both AES and Best Buy 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 Best Buy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between The AES and Best Buy Co, you can compare the effects of market volatilities on AES and Best Buy 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 Best Buy. Check out your portfolio center. Please also check ongoing floating volatility patterns of AES and Best Buy.
Diversification Opportunities for AES and Best Buy
Good diversification
The 3 months correlation between AES and Best is -0.06. Overlapping area represents the amount of risk that can be diversified away by holding The AES and Best Buy Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Best Buy 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 Best Buy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Best Buy has no effect on the direction of AES i.e., AES and Best Buy go up and down completely randomly.
Pair Corralation between AES and Best Buy
Assuming the 90 days horizon The AES is expected to under-perform the Best Buy. But the stock apears to be less risky and, when comparing its historical volatility, The AES is 1.03 times less risky than Best Buy. The stock trades about -0.01 of its potential returns per unit of risk. The Best Buy Co is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest 8,166 in Best Buy Co on January 19, 2024 and sell it today you would lose (566.00) from holding Best Buy Co or give up 6.93% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 97.83% |
| Values | Daily Returns |
The AES vs. Best Buy Co
Performance |
| Timeline |
| AES |
| Best Buy |
AES and Best Buy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with AES and Best Buy
The main advantage of trading using opposite AES and Best Buy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AES position performs unexpectedly, Best Buy 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 Best Buy will offset losses from the drop in Best Buy's long position.The idea behind The AES and Best Buy Co 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.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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.
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