Correlation Between AES and TARGET

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

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

Diversification Opportunities for AES and TARGET

-0.08

Correlation Coefficient

AES  TARGET

Good diversification

The 3 months correlation between AES and TARGET is -0.08. Overlapping area represents the amount of risk that can be diversified away by holding The AES and TARGET PORATION in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TARGET PORATION 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 TARGET. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TARGET PORATION has no effect on the direction of AES i.e., AES and TARGET go up and down completely randomly.

Pair Corralation between AES and TARGET

Considering the 90-day investment horizon The AES is expected to generate 5.04 times more return on investment than TARGET. However, AES is 5.04 times more volatile than TARGET PORATION. It trades about 0.15 of its potential returns per unit of risk. TARGET PORATION 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  349.00  from holding The AES or generate 35.11% 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.  TARGET PORATION

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.

TARGET PORATION

Risk-Adjusted Performance

Weakest

Over the last 90 days TARGET PORATION has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, TARGET is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with AES and TARGET

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

The idea behind The AES and TARGET PORATION 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 Anywhere module to track or share privately all of your investments from the convenience of any device.