Correlation Between AES and System1

Can any of the company-specific risk be diversified away by investing in both AES and System1 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 System1 into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between The AES and System1, you can compare the effects of market volatilities on AES and System1 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 System1. Check out your portfolio center. Please also check ongoing floating volatility patterns of AES and System1.

Diversification Opportunities for AES and System1

0.38

Correlation Coefficient

AES  System1

Weak diversification

The 3 months correlation between AES and System1 is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding The AES and System1 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on System1 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 System1. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of System1 has no effect on the direction of AES i.e., AES and System1 go up and down completely randomly.

Pair Corralation between AES and System1

Considering the 90-day investment horizon AES is expected to generate 2.82 times less return on investment than System1. But when comparing it to its historical volatility, The AES is 3.16 times less risky than System1. It trades about 0.16 of its potential returns per unit of risk. System1 is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  400.00  in System1 on May 26, 2025 and sell it today you would earn a total of  350.00  from holding System1 or generate 87.5% return on investment over 90 days.

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

The AES  vs.  System1

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.

System1

Risk-Adjusted Performance

Fair

Compared to the overall equity markets, risk-adjusted returns on investments in System1 are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating basic indicators, System1 unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with AES and System1

The main advantage of trading using opposite AES and System1 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AES position performs unexpectedly, System1 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 System1 will offset losses from the drop in System1's long position.

The idea behind The AES and System1 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.