Correlation Between Monks Investment and AES Corp

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

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

Diversification Opportunities for Monks Investment and AES Corp

-0.91

Correlation Coefficient

Monks Investment  AES Corp

Pay attention - limited upside

The 3 months correlation between Monks and AES is -0.91. Overlapping area represents the amount of risk that can be diversified away by holding Monks Investment Trust and AES Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AES Corp and Monks Investment 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 Monks Investment Trust are associated (or correlated) with AES Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AES Corp has no effect on the direction of Monks Investment i.e., Monks Investment and AES Corp go up and down completely randomly.

Pair Corralation between Monks Investment and AES Corp

Assuming the 90 days trading horizon Monks Investment Trust is expected to under-perform the AES Corp. But the stock apears to be less risky and, when comparing its historical volatility, Monks Investment Trust is 2.64 times less risky than AES Corp. The stock trades about -0.15 of its potential returns per unit of risk. The AES Corp is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest  1,313  in AES Corp on September 24, 2024 and sell it today you would lose (23.00) from holding AES Corp or give up 1.75% of portfolio value over 90 days.

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

Monks Investment Trust  vs.  AES Corp

Monks Investment Trust

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Monks Investment Trust are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Monks Investment may actually be approaching a critical reversion point that can send shares even higher in January 2025.

AES Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days AES Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Monks Investment and AES Corp

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

The idea behind Monks Investment Trust and AES Corp 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.