Correlation Between AES and M3

Can any of the company-specific risk be diversified away by investing in both AES and M3 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 M3 into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between The AES and M3 Inc, you can compare the effects of market volatilities on AES and M3 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 M3. Check out your portfolio center. Please also check ongoing floating volatility patterns of AES and M3.

Diversification Opportunities for AES and M3

-0.11

Correlation Coefficient

AES  M3

Good diversification

The 3 months correlation between AES and M3 is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding The AES and M3 Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on M3 Inc 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 M3. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of M3 Inc has no effect on the direction of AES i.e., AES and M3 go up and down completely randomly.

Pair Corralation between AES and M3

Considering the 90-day investment horizon The AES is expected to generate 1.26 times more return on investment than M3. However, AES is 1.26 times more volatile than M3 Inc. It trades about 0.15 of its potential returns per unit of risk. M3 Inc is currently generating about 0.07 per unit of risk. If you would invest  994.00  in The AES on May 27, 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 Against
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

The AES  vs.  M3 Inc

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.

M3 Inc

Risk-Adjusted Performance

Mild

Compared to the overall equity markets, risk-adjusted returns on investments in M3 Inc are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, M3 may actually be approaching a critical reversion point that can send shares even higher in September 2025.

Pair Trading with AES and M3

The main advantage of trading using opposite AES and M3 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AES position performs unexpectedly, M3 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 M3 will offset losses from the drop in M3's long position.

The idea behind The AES and M3 Inc 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.