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

0.31

Correlation Coefficient

Montauk Renewables  AES

Weak diversification

The 3 months correlation between Montauk and AES is 0.31. 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 1.49 times more return on investment than AES. However, Montauk Renewables is 1.49 times more volatile than The AES. It trades about 0.0 of its potential returns per unit of risk. The AES is currently generating about -0.16 per unit of risk. If you would invest  469.00  in Montauk Renewables on August 30, 2024 and sell it today you would lose (26.00) from holding Montauk Renewables or give up 5.54% of portfolio value over 90 days.

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

Montauk Renewables  vs.  The AES

Montauk Renewables

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Montauk Renewables has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, Montauk Renewables is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

AES

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days The AES has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's technical and fundamental indicators remain comparatively stable which may send shares a bit higher in December 2024. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.