Correlation Between Gates Industrial and AES

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

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

Diversification Opportunities for Gates Industrial and AES

0.75

Correlation Coefficient

Gates Industrial  AES

Poor diversification

The 3 months correlation between Gates and AES is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Gates Industrial and The AES in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AES and Gates Industrial 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 Gates Industrial are associated (or correlated) with AES. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AES has no effect on the direction of Gates Industrial i.e., Gates Industrial and AES go up and down completely randomly.

Pair Corralation between Gates Industrial and AES

Given the investment horizon of 90 days Gates Industrial is expected to generate 1.79 times less return on investment than AES. But when comparing it to its historical volatility, Gates Industrial is 2.89 times less risky than AES. It trades about 0.09 of its potential returns per unit of risk. The AES is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  1,171  in The AES on May 10, 2025 and sell it today you would earn a total of  114.00  from holding The AES or generate 9.74% return on investment over 90 days.

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

Gates Industrial  vs.  The AES

Gates Industrial

Risk-Adjusted Performance

Fair

Compared to the overall equity markets, risk-adjusted returns on investments in Gates Industrial are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak technical and fundamental indicators, Gates Industrial may actually be approaching a critical reversion point that can send shares even higher in September 2025.

AES

Risk-Adjusted Performance

Soft

Compared to the overall equity markets, risk-adjusted returns on investments in The AES are ranked lower than 4 (%) 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.

Pair Trading with Gates Industrial and AES

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

The idea behind Gates Industrial and The AES 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 Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .