Correlation Between AES and State Trading

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

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

Diversification Opportunities for AES and State Trading

-0.61

Correlation Coefficient

AES  State Trading

Excellent diversification

The 3 months correlation between AES and State is -0.61. Overlapping area represents the amount of risk that can be diversified away by holding The AES and The State Trading in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on State Trading 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 State Trading. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of State Trading has no effect on the direction of AES i.e., AES and State Trading go up and down completely randomly.

Pair Corralation between AES and State Trading

Considering the 90-day investment horizon The AES is expected to generate 1.18 times more return on investment than State Trading. However, AES is 1.18 times more volatile than The State Trading. It trades about 0.14 of its potential returns per unit of risk. The State Trading is currently generating about -0.03 per unit of risk. If you would invest  1,038  in The AES on June 29, 2025 and sell it today you would earn a total of  286.00  from holding The AES or generate 27.55% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	98.44%
Values	Daily Returns

The AES  vs.  The State Trading

AES

Risk-Adjusted Performance

Fair

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.

State Trading

Risk-Adjusted Performance

Weakest

Over the last 90 days The State Trading has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong fundamental indicators, State Trading is not utilizing all of its potentials. The newest stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with AES and State Trading

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

The idea behind The AES and The State Trading 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.