Correlation Between AES and Montauk Renewables

Can any of the company-specific risk be diversified away by investing in both AES and Montauk Renewables 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 Montauk Renewables into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between The AES and Montauk Renewables, you can compare the effects of market volatilities on AES and Montauk Renewables 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 Montauk Renewables. Check out your portfolio center. Please also check ongoing floating volatility patterns of AES and Montauk Renewables.

Diversification Opportunities for AES and Montauk Renewables

0.47

Correlation Coefficient

AES  Montauk Renewables

Very weak diversification

The 3 months correlation between AES and Montauk is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding The AES and Montauk Renewables in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Montauk Renewables 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 Montauk Renewables. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Montauk Renewables has no effect on the direction of AES i.e., AES and Montauk Renewables go up and down completely randomly.

Pair Corralation between AES and Montauk Renewables

Considering the 90-day investment horizon The AES is expected to generate 0.77 times more return on investment than Montauk Renewables. However, The AES is 1.3 times less risky than Montauk Renewables. It trades about 0.13 of its potential returns per unit of risk. Montauk Renewables is currently generating about 0.03 per unit of risk. If you would invest  1,012  in The AES on May 3, 2025 and sell it today you would earn a total of  311.00  from holding The AES or generate 30.73% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.39%
Values	Daily Returns

The AES  vs.  Montauk Renewables

AES

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in The AES are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady technical and fundamental indicators, AES unveiled solid returns over the last few months and may actually be approaching a breakup point.

Montauk Renewables

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Montauk Renewables are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite quite unsteady basic indicators, Montauk Renewables may actually be approaching a critical reversion point that can send shares even higher in September 2025.

Pair Trading with AES and Montauk Renewables

The main advantage of trading using opposite AES and Montauk Renewables positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AES position performs unexpectedly, Montauk Renewables 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 Montauk Renewables will offset losses from the drop in Montauk Renewables' long position.

The idea behind The AES and Montauk Renewables 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.

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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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.