Correlation Between Montauk Renewables and AES

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

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

Diversification Opportunities for Montauk Renewables and AES

0.44

Correlation Coefficient

Montauk Renewables  AES

Very weak diversification

The 3 months correlation between Montauk and AES is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Montauk Renewables and The AES in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AES and Montauk Renewables 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 Montauk Renewables 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 Montauk Renewables i.e., Montauk Renewables and AES go up and down completely randomly.

Pair Corralation between Montauk Renewables and AES

Given the investment horizon of 90 days Montauk Renewables is expected to generate 7.1 times less return on investment than AES. In addition to that, Montauk Renewables is 1.3 times more volatile than The AES. It trades about 0.01 of its total potential returns per unit of risk. The AES is currently generating about 0.13 per unit of volatility. If you would invest  1,012  in The AES on May 5, 2025 and sell it today you would earn a total of  311.00  from holding The AES or generate 30.73% return on investment over 90 days.

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

Montauk Renewables  vs.  The AES

Montauk Renewables

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Montauk Renewables are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent basic indicators, Montauk Renewables is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

AES

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in The AES are ranked lower than 9 (%) 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 Montauk Renewables and AES

The main advantage of trading using opposite Montauk Renewables and AES positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Montauk Renewables 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 Montauk Renewables 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.