Correlation Between AES and Midcap Sp

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

By analyzing existing cross correlation between The AES and Midcap Sp 400, you can compare the effects of market volatilities on AES and Midcap Sp 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 Midcap Sp. Check out your portfolio center. Please also check ongoing floating volatility patterns of AES and Midcap Sp.

Diversification Opportunities for AES and Midcap Sp

0.85

Correlation Coefficient

AES  Midcap Sp

Very poor diversification

The 3 months correlation between AES and Midcap is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding The AES and Midcap Sp 400 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Midcap Sp 400 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 Midcap Sp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Midcap Sp 400 has no effect on the direction of AES i.e., AES and Midcap Sp go up and down completely randomly.

Pair Corralation between AES and Midcap Sp

Considering the 90-day investment horizon The AES is expected to generate 3.87 times more return on investment than Midcap Sp. However, AES is 3.87 times more volatile than Midcap Sp 400. It trades about 0.16 of its potential returns per unit of risk. Midcap Sp 400 is currently generating about 0.13 per unit of risk. If you would invest  994.00  in The AES on May 25, 2025 and sell it today you would earn a total of  355.00  from holding The AES or generate 35.71% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	100.0%
Values	Daily Returns

The AES  vs.  Midcap Sp 400

AES

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in The AES are ranked lower than 12 (%) 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.

Midcap Sp 400

Risk-Adjusted Performance

Fair

Compared to the overall equity markets, risk-adjusted returns on investments in Midcap Sp 400 are ranked lower than 10 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak forward indicators, Midcap Sp may actually be approaching a critical reversion point that can send shares even higher in September 2025.

Pair Trading with AES and Midcap Sp

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

The idea behind The AES and Midcap Sp 400 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.